Replacing Travelzoo as a GrooveVC Focus Stock
Groove members who have followed and/or purchased shares of the “focus stocks” we recommend may own shares of Travelzoo. Those who did not sell in the 20% run up (we got notes from several indicating that you sold then and have been trading those swings ever since) that occurred in the weeks following our addition of it as a focus stock may still own shares with a basis in the range of where it closed Friday ($23). Today we are going to to something we have not done here at the Groove yet. We are removing Travelzoo as a focus stock because we don’t think our involvement can make a difference. We still believe in the potential for the stock to achieve strong gains for shareholders. In fact, we think the earnings report last week was proof that the company is moving in the right direction and that investors are beginning to see the potential here. We still believe that Travelzoo will move substantially higher from today’s levels – 30% or more at some point in 2013 when their reported numbers start to reflect the impact of the recently acquired hotel/lodging booking engine. The company’s move to focus resources on building out that aspect of the business has taken longer than we had expected, but we still believe that it will transform Travelzoo and that the stock will move substantially higher when the street sees evidence of this occurring.
Regardless, we believe that we should remove Travelzoo from our focus list and we are doing it for one reason. Travelzoo is simply too big for our group’s involvement to “move the needle”. We believe this to be true even if all Groove participants commit to using the services religiously. We can get all our friends and associates to sign up for the email deals and we can book our travel through them. But the email deals already have over 26 million subs and how many times are we going to book a vacation this year? Of course, every little bit helps, but we believe that our resources may be better focused on smaller companies whose services can be used daily (like Inuvo’s ALOT search and Bargain Match’s shopping tools) and whose operations could be materially impacted by the “religious” use of their services on a day to day basis. Thus, Travelzoo is no longer a GrooveVC “focus” stock and we will no longer be offering updates on it.
We like to have two “focus” stocks at a time, so we will begin the process of seeking out a new focus stock to add. Please send ideas with the understanding that a company as large as Travelzoo is a little too big. We are looking mainly for micro cap names and the best fit would be one that has services we can all use, get our friends/associates, etc. to use with an eye towards having a material impact on their operations over time. Please send as much info as possible along with resources to help us with the due diligence process. Thanks for being a part of the Groove community!