Eton Park and online travel firms
During 4Q14, Eton Park added new positions in Priceline Group (PCLN) and Expedia (EXPE). The fund’s position in TripAdvisor (TRIP) didn’t change. The positions in Priceline Group and Expedia represented 2.76% and 0.02%, respectively, of the fund’s 4Q14 portfolio—it’s worth over $7 billion.
TripAdvisor (TRIP) accounted for 0.27% of the fund’s portfolio value. It was the fund’s only exposure to the online travel industry. Of the three stocks, Priceline Group yielded returns of 11.06%, so far, in 2015. Expedia’s YTD (year-to-date) returns were 16.34% and TripAdvisor’s returns were 2.87%.
Why hedge funds invest in the online travel industry
As we noted earlier, online travel companies’ performances are related to their number of bookings. Hedge funds invest in these stocks considering that international tourism is growing. In turn, this would increase the demand for online travel bookings.
According to a report from the UNWTO (United Nations World Tourism Organization), “International tourist arrivals grew by 4.4 % in 2014 to 1.135 billion and in 2014, international tourism generated US$ 1.5 trillion in export earnings.”
With the proliferation of smartphone devices and increasing usage of mobile Internet, customers prefer to do more online bookings as opposed to visiting a traditional travel company. Cantor Fitzgerald’s report on the online travel industry’s outlook in 2015 said that “More than 20 percent of online bookings through Priceline Group Inc, Expedia Inc and Orbitz Worldwide, Inc. now occur via mobile devices. In addition, over half of TripAdvisor Inc’s web traffic now comes from mobile devices.”
Organic growth combined with the consolidation of different players in the online travel industry makes it an attractive place for investors to initiate investments. This could be a reason for Eton Park’s strong bet on Priceline Group in 4Q14.