Friday, May 6, 2011

Return of an Internet High-Flyer

What's been the hottest stock in the S&P 500 over the past two years? It's one more often thought of as a high-flying relic of the late-90s Internet boom: Priceline.com. Priceline was at 105 on May 5, 2009, and it closed yesterday at 533. That's what Peter Lynch would call a five-bagger.

The most surprising thing about this is that a few years back, Priceline looked dead in the water, not much different from Internet casualties like Pets.com or EToys. Priceline's stock previously peaked in April 1999 at 990 a share. Then came the high-tech crash, and Priceline crashed about as hard as any of them, bottoming out at 6.36 a share in December 2000. That's a loss of 99 percent of its market cap within the space of 20 months.

Since then, Priceline has made a painstaking return to profitability, with canny acquisitions and a return to its core business of travel. And unlike in those wacky Internet-era days, the company is actually turning a profit now. If you had been smart enough to buy a hundred shares when the stock was at its bottom, your $636 investment would now be worth $53,397.

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