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February Idea of the Month

A few personal buys and updates, plus another possible REIT opportunity

By Travis Johnson, Stock Gumshoe, February 12, 2016

As we enter mid-February and a slow week in Gumshoeland next week, I’ve got a few personal buys of stocks that we’ve mentioned before, and a new “Idea of the Month” candidate that’s maybe not quite ready to buy just yet (we’ll be closed on Monday, and will probably publish less than usual during the balance of the week as I take my leave to romp with the little Gumshoes during their vacation break — unless something shocking happens, there likely will not be a Friday File next week).

First I’ll share a couple updates and quick reactions to recent earnings, then we’ll morph into talking about the buys I made today, and we’ll close out with our “Idea of the Month.”  I’m all over the map with my blatheration this time around, but most of my thoughts right now are revolving around stable dividend payers and compounding yields, which is my “happy place” when the market gets tumultuous. Off we go!

Criteo (CRTO) had another blowout quarter. Criteo is a volatile stock because it’s priced for rapid growth… but so far, it’s delivering that growth and continuing to add customers, and the valuation has become much more reasonable thanks to 100% earnings growth in 2015 and a dip in the share price. Now CRTO trades at about 30X last year’s free cash flow and is still small and growing rapidly, with earnings growth of 40% plus expected this year.  I’m still holding my remaining position, and with a current PEG ratio of about 1.25 I consider it a buy at this price (half of my personal position was sold last month as part of my stop loss experiment).

The risks are legion, including competition — Google and Facebook, most prominently, since those are their biggest vendors of traffic and their biggest competitors, but also other ad-tech startups. CRTO is in much better shape financially than most of the other smallish competitors, and is almost unique among the small adtech companies in being profitable, let alone in posting great profit growth. I continue to be unworried about the rise of “ad blocking” software, which has been part of the “story” that has caused some suffering in these shares over the past year (if ad blocking does worry you, choose Facebook rather than Criteo or Google — browser-based ad blocking doesn’t work on Facebook’s mobile app, which is the ...

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