3SOF

Quote from: David Randolph on June 03, 2007, 06:40:18 AM

QuoteCan't at all understand why David bought this yet.

Hi BigSully, I said I would, and I did. If I said I would, and I didn't, you would say: "you didn't do what you said you would do" . The stock looks attractive to me, from a fundamental standpoint.

No david, I don't believe I would have come back later and said that. It's really good to see you have strong conviction in most of your picks. All I'm wondering about is how weak the stock is still behaving with the market making new highs. And the gap below 25 appears ominous to me. I prefer to wait. But you will probably be right, if not in the ST, at least eventually.

No near term catalyst for it to go up 2nd quarter will not be good because of asian expansion.
Stock is now at support if they dissapoint again next quarter then down to $20. It all rides on the next earnings report. I you think it will be good buy, if not stay away.


TZOO    $ 25.72
Travelzoo Inc   -0.06
Shares Short   2,143,500
Days to Cover (Short Ratio)   3.4
Short % of Float   72.91 %
Shares Short - Prior   2,011,000
Short % Increase / Decrease   6.59 %


April 26, 2007

Can Travelzoo make going to the zoo fun again?

Travelzoo is a great website and they have 11 million fans that feel the same way too. You don't book tickets at Travelzoo.com, you click through to the travel provider for that. They don't charge you for their information, newsletters, or research - they are the friendly online travel solution.

Travelzoo (TZOO) just reported earnings on Wednesday and revenue rose to $19.7 million from $16.4 million a year earlier. They spent $6.7 million in subscriber acquisition and in marketing the Travelzoo brand making a bet that their website is something special. CEO Ralph Bartel said on the earnings call, "we added four senior executives in North America, Europe and Asia. We believe that this positions Travelzoo well to capture the growth opportunities we see ahead for the future."

However their earnings disappointed Wall Street and despite the running of the bulls, Travelzoo got trampled. The stock is down 26% in the last 5 days and is currently flirting with a new 52-week low today. Travelzoo made $4.1 million, or 25 cents a share, for the quarter ended March 31, 2007. The guys at Thomson Financial were looking for a profit of 32 cents a share on sales of $20.4 million. Thus the reason why we are less than $.25 away from a new low and shares trading at $27.69. Turns out kids still love going to the zoo, but stockbrokers hate it.

So now that we've hit a new low and with all this money poured into building that fan base, what can we expect going forward?

Susquehanna Financial Group believes costs at Travelzoo will remain high throughout 2007 but improved profitability may show up by the first quarter of 2008. Stifel Nicolaus lowered their earnings estimate for Travelzoo from $1.22 to $1.11 per share, and cut revenue estimates to $81.0 million from $83.4 million.

Keep in mind Travelzoo has only 80 employees and revenue has grown an average rate of 57% for the past three years. What's hurting Travelzoo is they do not provide estimates of future earnings and Wall Street has no love or patience for that.

The bottom line is TZOO is one lean, mean, online-travel machine. As of last month, there were a ton of people betting against Travelzoo with the short percentage of TZOO's float at 29.30%. That's almost 1/3 of the 2.94 million shares of Travelzoo being traded held short. So now that those guys have cleaned house, is it safe to go to the zoo?

Over the past few days holding shares in TZOO was about as fun as visiting Jurassic Park. Now that the worst has happened and with their new fan base, maybe Travelzoo can bring back the fun in going to the zoo.

Frank Lara Jr.
April 26, 2007

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.

Quote from: yukiii on June 01, 2007, 12:52:42 PM

Quote from: soxguy on June 01, 2007, 12:40:43 PM
But isn't being counterintuitive part of this whole process? When TZOO looks bad and no one likes it,isn't that the time to buy? Just a contrarian pov.

But TZOO looks to be in a bad business model going forward and will find it harder to grow.

I will first start out by saying that Internet Marketing is my profession....

Yukii I disagree with that statement...  2+ years ago I would have definitely agreed with you, but today, you're absolutely wrong and TZOO with continue to grow and strengthen their business and market share.  Here is why:

To start I will simply point out some of the facts and changes which the internet travel business is currently experiencing:

* Hotels, airlines, etc have begun to advertise direct and offer best rate guarantees
* Hotels, airlines, etc have begun to "bundle/package" travel packages, just like wholesalers (expedia, travelocity, etc)
* Hotels, airlines, etc. have made an aggressive effort to reduce the margins that are paid to wholesalers to sell their product.
*  Hotels, airlines, etc. are mandating that wholesalers post/sell "rack rates" and not ever undercut the product suppliers (hotel, airlines, etc)
*  Wholesalers are starting to loss market share and will continue to do so because of this increased competition (more wholesale sites, hotels, airlines, etc)
* Consumers are smarter and much more internet savvy today, they are shopping and in most cases going direct to buy travel

You ask, what does all this mean and how does it help Travelzoo?  Well, Travelzoo has positioned itself perfectly, they cater to both the product suppliers (hotels, airlines, etc) and the wholesalers.  Travelzoo has the perfect business model and it will benefit significantly from the smarter consumer;  the product supplier (hotel, airline, etc) now advertises their own product selling direct to the consumer, the wholesaler (expedia, travelocity, etc) now has to aggressively advertise to recapture lost market share and compete with it's new competitors.   Travelzoo is a winner as long as they execute. 

I believe this says its all
http://stockcharts.com/h-sc/ui?s=TZOO&p=D&yr=3&mn=0&dy=0&id=p27639401911
I would wait if you think they will recover next year. Why tie your money up now. Its not going anywhere.

Quote from: yukiii on June 03, 2007, 11:46:45 PM
I believe this says its all
http://stockcharts.com/h-sc/ui?s=TZOO&p=D&yr=3&mn=0&dy=0&id=p27639401911
I would wait if you think they will recover next year. Why tie your money up now. Its not going anywhere.

You have a good point, but due to the low float and high short ratio, this stock can catapult  10+ pts in a single session. 

Quote from: David Randolph on June 03, 2007, 06:40:18 AM

QuoteCan't at all understand why David bought this yet.

Hi BigSully, I said I would, and I did. If I said I would, and I didn't, you would say: "you didn't do what you said you would do" . The stock looks attractive to me, from a fundamental standpoint.

QuoteThe author of that probably meant looking in the weekly chart.

In your copy/paste the author specifically wrote "daily" moving averages:

Quote"If a stock is under many or all of the key moving averages (20-, 50-, 100-, 200- and 250-day moving averages) ...

Quote from: soxguy on June 01, 2007, 12:40:43 PM
But isn't being counterintuitive part of this whole process? When TZOO looks bad and no one likes it,isn't that the time to buy? Just a contrarian pov.

That has been the case soxguy, as one can see at the chart below:

QuoteNo, just because a stock goes down, dosn't mean its a good buy.
I always look for good companies to buy when they are sold off and the business has not changed or in the wrong sector. But TZOO looks to be in a bad business model going forward and will find it harder to grow.

Bad business model? They had a net profit margin of 20.58% in Q1 2007, even though they lost money in Europe. And even though they paid 48.2% in taxes. This is the company that pays the highest tax rate I've ever seen, they should change their headquarters from NY to the Cayman Islands, the stock would double overnight

Quote from: nica33 on June 01, 2007, 01:09:44 PM
Interesting discussion here.....
I'm not an expert but I think why buy a stock that it's going down and it has not bottomed yet? Doing this is almost assuring more blood for the portfolio, isn't it? You can always keep it in your watchlist and buy when the technical conditions improve.  I'm not telling that the stock could not change the trend soon but it's all about probabilities.

JMHO

More blood? The Main Portfolio is up 20.28% so far in 2007 (a 55% annualized return), more than in the whole year of 2006 (when the strategy was almost exclusively technical), even though I made several mistakes, like buying TZOO at the top of its range, for example.

Anyway, what do you mean by "technical conditions improving"? The way I see it now, what you mean is: "why don't you wait to buy the stock at a higher price?" Lol, just kidding.

I know the trend is your friend and I respect the market. If you look at the Main Portfolio holdings, most of them have bullish charts. But why always give more weight to technical analysis than to fundamental analysis? Moreover, TZOO's chart is one of those where the technical analyst, buying when the trend was bullish and selling when the trend was bearish, was buying near the highs and selling near the lows. This is because the stock has been stuck in a long term trading range, between roughly $25 and $40. I believe I'm buying near the bottom of the trading range of this stock.

I have a book, one of the first ones I read about the stock market, that says the following about moving averages:

«Médias móveis funcionam muito bem em acções em tendência. Em mercados laterais deveriam antes chamar-se merdas móveis»  hahaha

Translation: "Moving averages work very well in trending stocks. In lateral stocks they should be called shitty averages instead" (it works better in Portuguese).

Ok, going back to TZOO. Company pays a lot of taxes. Still earns a lot of money. Business is expanding in Europe and Asia, but still losing money there. Business model should work as well in Europe and Asia as it did in the USA (perhaps even better in Europe, people travel more here), so these units will probably be profitable in the future.

Without Europe and Asia dragging down profits, instead contributing to them, TZOO may very well double the EPS it got in 2006, which was $1.01, to $2, in two years time. The Internet Information Providers industry trades at 32 times earnings. If you apply the industry average valuation to TZOO you get a $64 stock.

I'll keep holding the stock, regardless of short term technical fluctuations.

I apologize David. I didn't mean that 3SOF portfolios's performance were in red.  I know that they're growing nicely.  What I mean is what I've hardly learned: if a stock goes down 10 % it needs more tan that to get at the same point, how long will take to recover?....And after tat recovery when you will see gains?.....And as you say "buy the stock at higher price?" yes, sure yes, if the technicals tell me that.

I like a lot your long term fundamental approach, but I love the technicals to determine an entry price.

.....And I like this site.  I've learned from you and from most of the people here a lot of things that putting them together I couldn't find'em anywhere.

QuoteNo david, I don't believe I would have come back later and said that.

I was talking in general, not specifically to you BigSully1. I've received some private messages asking when would I buy back TZOO, since I said I would get back to it when I sold it.

The current time and price seems like a nice time to buy in my view, at the long term support area of $25 - $26.

QuoteAll I'm wondering about is how weak the stock is still behaving with the market making new highs. And the gap below 25 appears ominous to me. I prefer to wait. But you will probably be right, if not in the ST, at least eventually.

Yes, not behaving well in the short term. Not only because the general market is high and the stock is low, but also because there were good news out and the stock went down anyway:

• Travelzoo Canada Stimulates Demand for 130 Leading Travel Companies
PR Newswire (Mon 11:52am)

But since we know insiders are not selling and the company isn't diluting shareholder's value (in fact, it has been buying back shares aggressively), my guess is this is one of those strange bottoms, when everybody loses hope, because the stock doesn't go up, not even on what appears to be good news. Or else, bears are right and TZOO will just keep trending down.

QuoteYou ask, what does all this mean and how does it help Travelzoo?  Well, Travelzoo has positioned itself perfectly, they cater to both the product suppliers (hotels, airlines, etc) and the wholesalers.  Travelzoo has the perfect business model and it will benefit significantly from the smarter consumer;  the product supplier (hotel, airline, etc) now advertises their own product selling direct to the consumer, the wholesaler (expedia, travelocity, etc) now has to aggressively advertise to recapture lost market share and compete with it's new competitors.

Very good point DragoAMG, it didn't occur to me that a trend like that is unfolding. There are several "middle men" in the travel/hotel industry, but TZOO sells to both, the producers and the various middle men, like priceline.com.

QuoteI apologize David. I didn't mean that 3SOF portfolios's performance were in red.  I know that they're growing nicely.  What I mean is what I've hardly learned: if a stock goes down 10 % it needs more tan that to get at the same point, how long will take to recover?....And after tat recovery when you will see gains?.....And as you say "buy the stock at higher price?" yes, sure yes, if the technicals tell me that.

There are several stocks in the Main Portfolio that were down 10% or more after I bought them and now I'm winning on them. It didn't take all that long. What makes you think that because you buy when the stock is already going higher, you won't be in the hole for some time, if that stock has a normal correction, for example?

Same thing when buying when the short term trend is still down (but not the long term trend, which is lateral). The stock may go down some more, but if fundamentals are attractive as I believe they are, soon I'll be in the green.

QuoteI like a lot your long term fundamental approach, but I love the technicals to determine an entry price.

Technical analysis is based on an extrapolation of past behavior. If a stock has been going higher, it is supposed to continue that way. Same thing if it has been going lower. And same thing if it has been in a long term trading range. Historically the $25 - $26 area has been a nice entry point, so technically this is now a nice entry point, I'm buying at the bottom of the trading range. Of course, if the stock breaks the trading range on the downside by a considerable margin ... well, if that happens I'll probably admit I was wrong, the market is the one to say if I'm right or wrong, not my personal view of the fundamentals.

Quote.....And I like this site.  I've learned from you and from most of the people here a lot of things that putting them together I couldn't find'em anywhere.

Thanks for your nice words nica33 I've learned a lot from you too and hopefully will keep learning. I enjoy learning from other's experiences, not just my own, I believe I'll learn faster this way.

Going back to TZOO, the stock touched the bottom of the range at $25.34, and it closed just barely above it. I see good value in this area and I don't expect the stock to fall much further - it should start rising soon. I'll keep holding TZOO.

David Technically this stock is very attractive , and it's very important to finish this week above 25.25 .. But if it close below 25.25 by friday then it's going to be bad for this stock..
I think you should wait until friday if you are going to buy it to make sure you got in at the right price and time 

Quote from: Garoh on June 05, 2007, 09:31:47 AM
David Technically this stock is very attractive , and it's very important to finish this week above 25.25 .. But if it close below 25.25 by friday then it's going to be bad for this stock..
I think you should wait until friday if you are going to buy it to make sure you got in at the right price and time 

Hi Garoh, thanks for the suggestion, but I already bought at $26.01, as you can see at the Main Portfolio homepage.

I don't like to put things in those terms, like thinking that one day or a minor technical break could define the long term future for a stock. I don't like to think that way because it isn't true, only in our minds. I've seen hundreds of long term charts and I see that many times reversal points happen when least expected in terms of technical analysis.

Fundamentally I see value in TZOO at this point. In 2006 the company made $1.01, so the trailing earnings multiple is 25. The industry average is 32.3. Analysts expect the company to make $1.11 in 2007, so the forward earnings multiple is 23.

This doesn't seem all that cheap, but that's because it doesn't consider the gross and net profit margin the company has, which are much higher than the industry average. If TZOO is able to turnaround its European business into a profitable operation (I don't see why not), EPS will be a lot higher than analysts forecast, hence the discount to the industry peers will be deeper.

Technically the stock rose yesterday, for the first time in 6 days, after touching the medium term support. Maybe we'll get a bounce here, but I'll keep holding TZOO for long term fundamental reasons.

Quote from: bjc on June 01, 2007, 02:52:31 PM
I know David doesn't worry about liquidity anymore, but EBIX is INCREDIBLY illiquid.  Those big volume days were still only about 40 or 50 thousand shares.  Under 6k traded today.  I guess this may not matter, but it's just something to consider. If it became a 3sof pick, it would easily move a  few points I think.

up 4% today

Quoteup 4% today

EBIX looks good yukiii, but this is TZOO's thread. I didn't see you talking when TCHC gapped down 50% ... it's easy when you just talk about the stocks that go up, or talk about the past : "buying at $15 David? I bought at $3, selling now".

Again, do you want to have your own portfolio here at 3Stocks? You're disturbing my work.

As for TZOO, the stock traded below the medium term support level, but ended down just slightly, at $25.5. I see a bounce coming, but more importantly, I see a very profitable business model to own for the long term.

I'll keep holding TZOO.

If we read TZOO's earnings press release, we'll see that the company continues to grow, and it was only less profitable because of the recent investments it made that are still losing money and higher taxes:

• Travelzoo Reports First Quarter 2007 Results
Business Wire (Tue, Apr 24)

Over the medium term, instead of $1 or so EPS, TZOO will probably earn $2 or so. And instead of being a $25 stock, it will then be a $50 stock. This is the way I see the company.

And it's not a small cut of the 2006 low level of $25.34 that is going to change my view. I'll keep holding TZOO.

the chart seems ugly....i hope it does go to twenty...why not enter in a uptrend...i dont get it

Quote from: ket1390 on June 09, 2007, 01:51:48 PM
the chart seems ugly....i hope it does go to twenty...why not enter in a uptrend...i dont get it

Perhaps if you would take the effort to read what I've been writing you would get it. But of course, it is easier to draw a line in a chart and think you're going to be very successful as an investor over the years using that kind of simplistic strategy. I've read many books on successful investors. Not even one was a pure technician and most of them don't even look at charts.

This doesn't mean I was right about buying TZOO at $39. Of course I was dead wrong. And I can be wrong again here buying at $26, time will tell.

But this stock won't go up or down, over the next several quarters, because of what the chart says now. The chart knows nothing about the future, as one can see in this stock's past. For all I care, if the tax rate goes down from 48% to say, 40% in the second quarter TZOO will beat expectations by a wide margin and the stock will gap up 20% just as easily as it gapped down 20% when it missed expectations in 1st quarter 2007.

hehe, I always knew how fundamentalists could be boring, but now I know what it is to be a fundamentalist not understood by the chart readers. Perhaps the best course of action is to have an open mind to the other's ideas. So, let's talk technical analysis:



The stock has been trading roughly between $25 and $40 for the past year or so. There are huge gaps to be closed, both below the current price and above the current market price. I don't know which one will be closed first, but the history of this chart is for the stock to continue trading within its lateral trading channel.

Now fundamentally. For example, TZOO is a better business than PCLN, since its net profit margin is much higher, and yet PCLN is trading at 30 times 2006 earnings and TZOO at 25 times 2006 earnings.

I believe TZOO's revenues may grow 23% a year for the next three years, given the company's international expansion. I believe net profit margin will expand from the current 24% to 30%, when the company turns the European business profitable, probably in 2008. And I believe that given this TZOO will trade at the Internet Information Providers industry average valuation of 31 times earnings. If this happens, TZOO will be an $87.32 stock in early 2010, and this is a fact.

One can draw all the lines he wants on a stock chart, but fundamentals, not technicals, will command the price of the stock over the long term.

I'll keep holding TZOO.

Nothing new on TZOO, just keep holding it.