Investors in Travelzoo
What do they do?
Often misunderstood as a competitor with companies such as priceline.com
In addition, Travelzoo is making serious inroads in the international community. The company currently has local deals posted for London, Paris, Berlin, Budapest, and Madrid. After watching Google's
With the natural progression of international deals eventually leading to Asia, one could see why Travelzoo would be a tempting buyout target for Chinese Internet leaders Baidu
So what's the problem?
With a differentiated product, a high-margin deals market, and international appeal, one would think shares of Travelzoo would be zooming up -- or at least holding steady. And yet, that hasn't been the case. As a shareholder myself, I've been perplexed by this ... until I took a look at recent insider trades.
Ralph Bartel, Travelzoo's founder and former CEO, held 66.2% of the company's shares outstanding as of March 31, 2011. Since then, he's been busy selling. Take a look below to see how fast he's been unloading shares.
Source: Yahoo! Finance.
Don't hit the panic button
Normally, selling 2.3 million shares of one's own company would be a huge red flag for me as an investor. But actually, I'm not that worried. Bartel still owns 8.6 million shares, or roughly 52% of the company.
I would wager that the reason for the price drop has to do with the increase in float (or shares that are available for trading on the open market). When Bartel was holding tight to his shares, there were only 5.54 million shares available for guys like me to buy. Bartel's selling spree increased the amount of available shares by 41%. Whether its coincidence or not, that's almost exactly how much the price has fallen since Bartel started selling.
In the short term, this means that supply of shares far outstripped normal demand. When this happens, the price of a stock (or anything, for that matter) drops.
But over the long haul, the number of shares outstanding hasn't changed one bit because of this. Eventually, the stock's price will reflect its ability to grow earnings per share -- and not the amount of shares available for trading.
In the mean time, I invite you to add Travelzoo to your watchlist. Now seems like a great time to buy into the company -- which is exactly what I'll be doing two days from now!
- Add Travelzoo to My Watchlist.
Fool contributor Brian Stoffel owns shares of Google and Travelzoo. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google, priceline.com, Sohu.com, and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.