Saturday, April 30, 2005

a few shorts on the radar

If the market manages any kind of bounce in May-June (and these names continue to rally), I'll look to short Sears (SHLD) and Priceline (PCLN). On SHLD, I'm looking at a $150-$155 short price and on PCLN, something around $30.

For Sears, it's hard to make a case for them operationally. The story is all about cost cutting and real estate sales. I tend to doubt the optimists case re real estate successes. If SHLD wants to dump some Sears mall-based stores, what can a buyer put in this place? You can't very well put a condo next to the GNC and Zales. I assume a retailer (pretty large) would have to fill in this space. I don't know who that retailer would be. On PCLN, they have recently moved away from their "opaque" model and more towards a traditional online travel model (like Expedia). Here, basically I think the valuation is stretched (20x '05 EPS), competition is intense (Expedia, Hotels.com, Travelocity, Orbitz, Yahoo Travel and Yahoo's Farechaser, Kayak and other travel search engines, the hotels and airlines themselves) plus I would not want to bet on the U.S. consumer in '05-'06.

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