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AQR Capital Lowers Holdings in Priceline Group by a Massive 82%

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Apr. 27 2015, Updated 8:05 a.m. ET

AQR Capital’s holdings in the Priceline Group

AQR Capital nearly closed its position in the Priceline Group (PCLN) by decreasing the number of shares held in the company from 82,728 in 3Q14 to 15,238 in 4Q14. This represented a massive 82% decrease. PCLN formed 0.04% of the fund’s fourth-quarter portfolio.

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PCLN overview

The Priceline Group, a leading player in the online travel services industry, has six primary brands and several ancillary brands.

Here are PCLN’s primary brands:

  • Booking.com is a popular website that allows consumers to make hotel reservations worldwide.
  • Priceline.com offers travel reservation services online, mainly within the US. The website provides airline ticket, rental car, and hotel reservation services.
  • Agoda.com is a leading online service for making hotel reservations. The website caters primarily to consumers in the Asia Pacific region.
  • KAYAK offers an online service that helps consumers search for and instantly compare prices from several hundred travel websites.
  • Rentalcars.com is a leading online service for rental car reservations. It enables consumers to reserve rental cars in more than 25,000 locations around the globe.
  • OpenTable is a leading online service for making restaurant reservations. Priceline acquired OpenTable in July 2014.

PCLN is part of the Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares US Consumer Services ETF (IYC) with exposures of 2.72% and 1.84%, respectively.

Strong business performance in 4Q14

For the fourth quarter, Priceline’s gross travel bookings—the total dollar value, including fees and taxes, of all travel services bought by clients—totaled $10.7 billion. This represented a 17% increase from to the prior-year period. International operations contributed to this growth with significant outperformance.

Gross profit for 4Q14 was $1.7 billion, showing an increase of 26% over the prior-year period. International operations contributed $1.43 billion to fourth-quarter gross profit, which was an increase of 24% over the prior-year period.

Priceline’s earnings per diluted share rose from $7.14 in 4Q13 to $8.56 in 4Q14.

Investments for future economic profits

PCLN’s management mentioned that the company would continue making investments in the its recent acquisitions:

  • OpenTable
  • BookingSuite, which offers hotel marketing services

The company expects these investments to show strong growth in the future. Additionally, Priceline’s board has authorized a common stock repurchase of up to $3 billion.

The Priceline Group trades at a price-to-earnings (or PE) ratio of 25.9x. Peer Expedia (EXPE) trades at a PE ratio of 33x.

Google (GOOG) is proving to be a competitor to Priceline in the market for online travel bookings. In 2011, Google acquired ITA Software, a software company offering flight information services. Google also licenses software for hotel booking through Room 77 and has a meta-search service for hotels called “Hotel Finder.”

We will discuss AQR Capital’s lowered position in Schlumberger (SLB) in the next part of this series.

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