The stock market has already factored in the challenges facing the travel and retail sectors into Priceline’s stock price, Reuters and Barron’s both reported.

According to Barron’s, as the current financial crisis deepens, consumers are going to devote an increasing amount of time to their personal and household spending budgets – a point that Money Morning has repeatedly made as part of its ongoing “Credit Crisis Safety Plays” series. As those consumer concerns about spending and household budgets increase, Priceline’s name-your-own-price business will become a bigger draw, Barron’s, the popular investing weekly, said in its most recent edition.

Barron’s also said Priceline has little debt and plenty of cash on its balance sheet, including $282 million in free cash flow this year. At Friday’s closing price of $54.57, Priceline was trading at 8.8 times projected profits for 2009. That’s well below the average Price/Earnings (P/E) ratio of 21 for Internet retailers, and 9.0-plus for the travel and leisure sectors, Barron’s reported.

Priceline also has a tendency to report upside earnings surprises. In each of the past four quarters, the Norwalk, Conn.-based Priceline has beaten analyst estimates by amounts that range from 9.9% to as much as 27% (Please see accompanying chart).

Strategy Shift a Major Plus

According to noted travel writer Arthur Frommer, Priceline.com was largely once just “a rather exotic service meant only for the gamblers among us – the folks willing to accept the risk of a 6 a.m. flight or an out-of-the-center hotel. By featuring its bidding process (‘name your own price’), Priceline.com came up with absurdly low air or hotel rates, but with the drawback of sometimes producing a dawn departure, a multi-stop flight or a badly located hotel.”

But that’s changed. In a story he penned for TheLedger.com, Frommer said that while Priceline “still maintains its ‘name your own price’ option – the way to get the very lowest prices imaginable - it now also offers the same full-disclosure airfares and hotel rates that Web sites like Hotels.com, Expedia.com (EXPE), Travelocity.com, Orbitz.com (OWW) and others offer.”

The bottom line: Priceline.com often beats the prices offered by these other “full-disclosure” Web sites – and without charging the extra fees that these other sites hit users with, Frommer wrote.

The economic slowdown may also benefit Priceline. The financial crisis has hit the travel sector and the airlines hard. So the major airlines are now using Priceline.com as a way of disposing of their unsold seats – “of which there are a great many,” Frommer wrote. But that’s good news for the more-adventurous traveler, since the “last-minute” airfare deals feature has returned to the Priceline.com Web site, Frommer said.

Priceline is now going global. With its recent acquisition of European hotel search engine called Booking.com, Priceline.com is also has become a standard full-range search engine for hotel rates both in the United States and abroad. Booking.com is the largest of the hotel booking sites in Europe, meaning users will find offers from some of the “more interesting, nonchain, boutique-like hotels that are often absent from American hotel search engines.”

Master Marketer

When it launched its somewhat campy television ad campaign, Priceline.com was smart enough to go after the king of camp himself – Shatner, whose entire TV life has been spent playing such campy characters as Capt. James T. Kirk (Star Trek), police Sgt. T.J. Hooker (T.J. Hooker) and legal legend (in his own mind) Denny Crain (Boston Legal). Shatner’s performances as the “Priceline Negotiator,” have spawned kudos both for Shatner and for Priceline.

Curiously for Shatner, however, it’s original “Star Trek” series veteran Leonard Nimoy (Mr. Spock), and not the irrepressible Shatner – described by one writer recently as the “master of the strained staccato delivery” who landed a role in the new Star Trek (2009) movie due out next year.

But Shatner does have a new talk show starting: Shatner’s Raw Nerve debuts Dec. 2 on the Bio Channel, media reports state.

Source: Hot Stocks: Priceline.com Shares Poised to Beam Up, Barron’s Says

“Hot Stocks” is a new Money Morning feature that analyzes the investment outlook of global companies that are in the news. This is the fifth installment of this ongoing investment series

Byron, on his Energy and Oil blog, has a great piece on the future of aviation. He reckons big changes are coming thanks to high crude oil prices…

Mother Nature is taking her revenge in the form of high-priced oil. The cost of jet fuel is soaring. The airplanes of the world are starting to get grounded. The skies of the future will not be so crowded. Flying will cease to be an option for many tens of millions of Americans — maybe for hundreds of millions.

In the future, only the most efficient jets (like Boeing’s new 787 Dreamliner) will ever go wheels up at the end of a runway. Ticket prices will be high. How soon will these things happen? I think that we will experience our first silent spring as early as next year.

Now, Byron says, Northwest (NYSE:NWA) and Air Canada (TSE:AC.A, AC.B) are now cutting flights within the US, and grounding more aircraft…

The Airline Waiting Game

By Byron King

Thing is, most of the airline cuts announced to date have not yet taken effect. The plane groundings and service cutbacks will occur towards the end of the year and into 2009. As of now, almost all of the flights are still rolling down the runways.

For the flying public, all that passengers are seeing just now is higher ticket prices and the nickel-and-dime stuff like charging for bagage check and paying for the sodas in coach class. A lot of people who bought tickets for summer travel back in the winter are feeling no pain, really.

Wait until people go to the likes of Orbitz (NYSE:OWW) and Priceline (NASDAQ:PCLN), and want to book flights in the first quarter of 2009. Good luck.

Choices of flights, connections, timetables and fares will be causing serious heartburn.

As I’ve been saying, in six months you will not recognize the US airline industry.

More info here.

Until next time,

Byron King

Note: Byron King is a frequent contributor to the free e-letter Whiskey & Gunpowder. To receive daily insights into energy, oil, commodities and other natural resources sign up here!

Source: The Airline Waiting Game

Supporters of this notion want you to wave the white flag and give up on trying to beat the market. Why? They don’t believe it’s possible. Instead, they believe that rational, self-interested investors incorporate every bit of material information into the share prices of pubic companies, as soon as it becomes available. The market is so efficient, they argue, that it is futile to attempt outperforming it, since share prices will always reflect everything that can be known about the future prospects of a business.

Let’s think about this. We’re all self-interested, yes. But rational?

Is a young woman thinking rationally when she marries the troubled guy who promises to change his ways and hew to the straight and narrow? Is a young couple thinking logically when they buy more house than they can afford so they can live up to a certain image of success? Is a balding, middle-aged man thinking rationally when he plunks down for an expensive convertible to impress women half his age?

Perhaps not.

And now we have more than just anecdotal evidence.

Efficient Market Hypothesis vs. The Mind of The Market

We have Michael Shermer’s excellent new book “The Mind of the Market.” Shermer, a columnist for Scientific American and author of nine previous books, writes that, “We are remarkably irrational creatures, driven as much (if not more) by deep and unconscious emotions that evolved over the eons as we are by logic and conscious reason developed in the modern world.”

He backs up this claim with plenty of examples from the new science of behavioral economics. Studies show, for example, that most people are willing to drive five blocks if they can buy a $100 cell phone for half price. But they are far less willing to drive five blocks to save $50 on a $1,000 plasma TV. Why? After all, fifty bucks is fifty bucks, no matter how you spend it – or save it. But, according to Shermer, “mental accounting” makes us reluctant to make the effort to save money when the relative amount we’re dealing with is small.

Or take the “sunk-cost” fallacy. Objectively, a company with lousy business prospects is not worth holding, no matter what you paid for it. Yet many investors will hold on to losing investments for years, even when it’s clearly unprofitable. Shermer correctly points out that, “Rationally, we should just compute the odds of succeeding from this point forward.” Yet investors who have sunk a lot into a stock – including a fair amount of ego – have trouble doing this.

Mental accounting and the sunk-cost fallacy are just the tip of the iceberg. Shermer shows that consumers and investors also fall prey to cognitive dissonance, hindsight bias, self-justification, inattentional blindness, confirmation bias, the introspection illusion, the availability fallacy, self-serving bias, the representative fallacy, the law of small numbers, attribution bias, the low aversion effect, framing effects, the anchoring fallacy, the endowment effect, and blind spot bias. (And you thought most people only had a couple small glitches upstairs.)

Efficient Market Hypothesis & The Stork Theory

By the time Shermer is done exposing all the flaws in our mental machinery, you feel inclined to put the efficient market hypothesis right up there with the “stork theory” in sex education.

Okay, maybe I’m exaggerating… a little. Every experienced investor knows that shares of most publicly traded companies are fairly efficiently priced most of the time. But that’s a whole lot different than saying all shares are efficiently priced all of the time, the foundation stone of efficient market theory.

Was Priceline.com Inc. (PCLN) efficiently priced at more than $150 in May 1999 and then again at roughly $1 eighteen months later?

Of course, the real hurdle for efficient market theorists are not arguments like these. Rather, it’s the audited track records of men like Warren Buffett, Peter Lynch, and John Templeton, who have shown they can beat the market not just from one year to the next – which efficient market types attribute to “luck” – but over decades.

And they did it not by deciding whether to be in the market or out, but by deciding which companies were mispriced and then loading up on them. That’s exactly what most investors should be doing in these uncertain times.

Buffett summed our view up nicely – if not entirely accurately – when he once remarked, “I’d be a bum on the street with a tin cup if the markets were always efficient.” And that’s not hindsight bias.

Alexander Green walked away from a prestigious position with one of the country’s leading money-management firms at the height of the stock market boom in the late 1990s – retiring from Wall Street after 16 years at the ripe old age of 43. That’s when he became Investment Director for Investment U‘s premium stock advisory service, The Oxford Club – a private financial organization dedicated to building and preserving the wealth of its members, independent of Wall Street’s dubious influence. To learn more about Investment U, please click here.