It's been a mere four months since my Special Situations portfolio picked up shares of TripAdvisor
I originally purchased the stock to take advantage of the spinoff, in the classic Joel Greenblatt special situation. TripAdvisor is the fast-growing, high-margin component of the former Expedia, while Expedia itself is the slower-growing, less profitable division. Also attractive is TripAdvisor's low need for capital expenditures, meaning it's a cash machine. So I expected it to attract the interest of investors, who probably would assign it a high multiple.
TripAdvisor has a competitive advantage in its review system that attracts viewers who then provide more reviews, resulting in a virtuous circle and some nice network effects. I also like the fact that 62% of sales came from the U.S., giving the company plenty of room to expand internationally.
Shares came out of the spin around $28 a pop and have now run to more than $42 -- a 50% gain in a little over four months. That move up values the stock at what I estimate to be 20 times the EV/EBITDA multiple for 2012 earnings. And while the company has some formidable growth opportunities overseas as well as domestically, I think it's pretty richly priced here. So I'll be unloading the shares from my Special Situations portfolio.
So long, TripAdvisor. It was a fun journey!
This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time, free stock picks. See all of our Rising Star analysts (and their portfolios).