Dealmaker’s Diary: How This “Old Economy” Giant Outperforms Most Tech Stocks

Alpesh Patel|September 11, 2025

Silicon Valley gets all the headlines.

Venture capital flows into AI startups by the billions.

Meanwhile, this “old economy” giant quietly uses machine learning better than most pure-play tech stocks.

This $181 billion travel powerhouse has been deploying artificial intelligence for years – dynamic pricing algorithms, fraud detection systems, personalized recommendations for millions of users.

The results speak louder than any IPO hype:

• 59% cash return on capital invested (my secret weapon)
• 1.7 Sortino ratio (exceptional risk-adjusted returns)
• 12.7% volatility (remarkably stable for such performance)

This isn’t some speculative venture burning cash on promises. It’s a proven business model enhanced by AI, generating real profits from real customers.

Sometimes the best technology investments aren’t the obvious ones.

Click on the image below for the name and ticker.

Transcript

Hello, friends. Welcome to another Stock of the Week from the Dealmaker’s Diary. I have Booking Holdings. Now, this one is a big name, so you might ask why I don’t give you some small names, but if they’re going to be making money, they’re going to be making money.

Let’s look at this in detail. Priceline, Agoda, Kayak, OpenTable as well. So a lot of big brands that they happen to own. It’s got a market cap of about $181 billion and generated roughly $25 billion in revenue.

So we’re talking about a big company.

Well, why would it impress us? Well, it’s expanding with AI-driven personalization, and it can do this because it’s such a big company. But, again, it comes down to the numbers. Now, as you know, before I like to look at numbers, each week I like to educate and inform myself on how they’re using AI.

Personalized travel recommendations – that would seem obvious. Even I could have guessed that. Dynamic pricing and revenue optimization. Machine learning models adjust pricing in real time based on demand, competition, seasonality, travel behavior – maximum revenues for partners.

This is the bit where I get worried that if I keep searching the same thing, they’re going to keep bidding up the price, and so I go into a different laptop, look at it, and then buy it through that.

Fraud detection, secure payments – really important because, well, fraud is increasing and they’re getting smarter. We need AI to counter that. AI-driven customer support.

I see a lot of companies doing that. Search and booking optimization – improve search rankings, filters, recommendations, and that could be good because as they get better at doing their job in delivering what the client wants, which is what that’s talking about, then guess what happens? Client’s happier, word-of-mouth, and so on.

Travel experience prediction, predictive analytics – assess factors like flight delays, hotel demand, travel disruptions. They could, again, beat the competition that way. How have they been doing?

Well, on my Growth Value Income algorithm, which looks at the valuation of a company, the revenue growth, the dividend, it’s seven out of 10. So meets our minimum criteria, at least. That’s good. Forecast price-to-earnings – you’re paying $25 for every future dollar of profits.

A little bit expensive. I’ve mentioned the AI, so you might think you’re paying a premium for prospective growth.

Here’s what I think you’re really paying a premium for…

Cash return on capital invested: 59%. Now companies in the top quartile, according to Goldman Sachs Wealth Management, of all companies in the top quartile by CROCI generate 30% per annum as a basket of stocks. At 59%, it doesn’t mean you’re going to produce more, but what it means is you’re in the top quartile and then some. Fantastic.

Sortino – high average return, low downside volatility – 1.7. Combined with the CROCI, probably two of the most important and impressive results I’ve seen of any company probably in the last year. Volatility pretty low, just above 10%. So 12.7%, unusually low.

Other than that forecast P/E, things are looking exciting. I’ve got to project that trend forward. It’s the obvious thing to do.

You can see the drawdowns in the past and the durations where you might be underwater.

Duration and depth of drawdown is what will be your risk. But 40% over 12 months – given that on a discounted cash flow basis, it’s also undervalued.

That’s got a lot going for it. So, yeah, I like it. Can I give some negatives? September tends to be a bad month historically for it. MACD, momentum measure, a bit overbought.

So expect dips, volatilities, possibly a rough ride.

The biggest danger will be if 2022 repeats itself because then you’ve got to wait longer for it to break even. But other than that, the trend direction is quite clear. It is in one direction, and the company keeps doing the right thing. So that’s good as well. Thank you.