Name your own Price(line) by Ram Seshadri - A TigerInvestor.com Article
Here is a great saying to kick off today's DMV. This gem is from Barton Biggs who is one of my favorite commentators in the markets: "New Economy stocks are being priced as if they have no risk and Old Economy stocks are being priced as if they have no opportunity". Wow! I could not have said it better. Risk and Opportunity, folks. Right now, the owners and officers of the New Economy are being given a blank check from ordinary, poor Americans to cash. Many New Economy nit-wits have made billions of dollars by promising us that they are building the Merck's (MRK) and Microsoft's (MSFT) of tomorrow. They better be because as I write this some dot-com millionaire is cashing out his/her options and retiring for life after doing a year's worth of work or at most four years'. It took Bill Gates, the creator of America's current dominance in technology and the God in my business pantheon, blood, sweat and tears and a single-minded passion to turn Microsoft (MSFT), into the greatest company in the history of the world.
You might think I am crazy to use such superlatives to describe a mortal and a mere company in those terms. But every day that I look at companies that have merely doubled their $12 million revenues to $24 million being valued at $100 billion and their officers and minions being given billions of dollars to cash out, my expectations of their performance has also risen like their stock price. They better do deliver results as much as Microsoft and Merck did in building real-world value for years and years at a time through the old fashioned American way: Hard work. If not, we, the individual investors, will make sure that what happened to Procter & Gamble (PG) yesterday was a mere prelude to the thrashing that we will give these dot-com companies and their unworthy billionaires.
While we are in the subject of prices of companies, let me talk about an interesting company that I had originally shunned that I am now warming up to. The company is Priceline (PCLN) and those of you who have perused my message boards know that I wrote a negative piece about this company sometime ago. I would now like to present a different opinion and the reason for my change of mind.
Priceline has been a great concept but a lousy implementation. Instead of selling unused airplane tickets that would expire anyway through an auction process ("the concept") to customers, Priceline came up with a lousy "guess your own price" implementation, that ripped off consumers who can get their ticket only by bidding a price equal to or greater than the price that was resident in Priceline's computers. This is the major reason why I hated Priceline the company and consequently, its stock. Apparently other investors thought the same because the stock went straight down from its IPO salad days.
Recently however, Priceline did a couple of things that made me sit up and notice.
One, Priceline finally noticed its long-suffering shareholders and started taking some steps to address their needs. Shareholders don't care about a company, they care only about the stock price (preferably going up). However, to shareholders' chagrin, Priceline's stock has been going the wrong way for nearly a year because management focused on the business a little too much and neglected Wall Street. I got a sign last week that all that might be changing.
Priceline hired Heidi Miller who was the CFO of Citigroup (C) to become CFO of Priceline. Needless to say, Heidi is a savvy dealmaker and a Wall Street "heavy". She will now play the Street like a consummate violinist. She even arranged Priceline's first-ever Wall Street love-fest yesterday which caused many an analyst to run out to their phones and woo the public with Priceline's stock.
Second, Priceline last month announced a new initiative where Priceline consumers can bid on gasoline and save may be 10-20 cents on the gallon per trip. This was the blow-out announcement that I was expecting for a long time. I believe that this announcement, coming at the height of oil price mania is just the perfect pitch that any marketing man/woman could have conceived to put Priceline in the hands of 100 million consumers eventually. To me, the downside in Priceline's stock (barring a major market meltdown) has been removed with this announcement. This is the "killer app" that will drive Priceline to nearly every American home if it ever will.
So, I like Priceline now. Where do I think it will go next? I believe that since Priceline has never split its stock, and since Heidi Miller is on board, I think that it is a safe bet that the stock will reach $100 in the next few days or weeks in order to reach stock split territory. In addition, since chart readers do not like charts that don't take out their old highs, it is also a definite possibility that Wall Street analysts (who are all too aware of stock charts and TA these days) will talk up the stock at the right levels in order to nudge it towards its old highs in the 160's. Can I guarantee it? No way. But this is as good an idea you are likely to get from me as you can get from talking to a Wall Street analyst yourself. And better still, my services are free...
Note about today: I continue to maintain that the trend in the Nasdaq is down until it takes out its intra-day high of 5006 reached a couple of days ago. So until that level is breached, I will not turn positive on the Nasdaq highflyers.
(Disclosure: As of this writing, I hold none of the stocks/options mentioned in this column except being Long PCLN though positions can change anytime). |
