With the summer travel season in full swing, now is a good time to pay attention to successful companies addressing the needs of travelers. Two companies, in particular, that have significant share in the online world, are worth having a look at.
Priceline (PCLN) is the giant in the industry, with a market cap of about $65 billion. Its nameplates include Booking.com, priceline, KAYAK, agoda, rentalcars and OpenTable. The company operates in about 200 countries.
Expedia (EXPE) is another major player, with a market cap in the neighborhood of $17 billion. Its stable of companies includes Expedia, Hotels.com, Orbitz, HomeAway, Travelocity, Trivago, Hotwire and CarRentals.com, and it has booking sites in 75 countries.
Online planning and reservations have become ubiquitous. Statistic Brain reports that 57% of all travel reservations are made on the internet. Priceline's and Expedia's competitive advantages include size, clout, well-known brands and management and technical know-how.
In addition, both are favorites of my Peter Lynch-based strategy. In 2003, I created a number of automated strategies based on how well-respected investment gurus invest. Peter Lynch, the legendary mutual fund manager, was the basis for one of my first strategies.
This strategy focuses on the price to earnings to growth ratio, which is the P/E ratio relative to growth, and is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is acceptable, according to this strategy.
Both Priceline and Expedia are fairly close to this maximum: Priceline's P/E/G is 0.95, while Expedia's is 0.90. If you want to take advantage of these companies' growth potential -- and do so at a favorable price -- now is a good time to buy. If their stock prices go up much more, they will move the P/E/G ratios out of the acceptable range.
Dominant in a growing industry, both these companies are well positioned to prosper in the coming years. And they currently have well-priced stocks, as the Lynch strategy shows. Now is the time to get on board.