Green Light for Traffix
07/29/2005 12:00 am EST
John Buckingham is deservedly one of the most popular speakers at Money Show events. His long term, value and growth oriented strategy keeps his newsletters and funds at the top of the long-term performance charts. Here, he looks at a cash-rich, dividend-paying tech stock.
"With inflation seemingly under control and former Fed Governor Ben Bernanke recently predicting that economic growth this year should be 3.4% despite high energy prices, Goldilocks appears to be alive and well. The not-too-hot, not-too-cold outlook for economy, significant merger and acquisition activity, strong balance sheets for much of corporate America enabling dividend hikes and big share buybacks, lackluster yields on alternative investments and reasonable valuations (the S&P 500 is now priced at 17 times 2005 earnings estimates and 16 times the current 2006 forecast), we can’t help but be optimistic.
"Meanwhile, online marketing firm Traffix (TRFX NASDAQ) remains one of the highest yielding names among our tech holdings, currently paying 5.3%. In addition, its balance sheet is pristine with some $30.6 million ($2.18 per share) in cash and investments and no long-term debt. The company recently reported a fantastic second quarter, showing a year-over-year revenue gain of 82% to $16.6 million. Sequential sales growth was 25%. Net income rose by a penny a share to $0.05.
"Growth came both organically and via the incorporation of revenue from acquisitions— Send Traffic and Hot Rocket in June 2004 and January 2005, respectively. The stock is a member of our Buckingham and Millennium Portfolios. The firm's chairman and CEO Jeffrey Schwartz supported the company's business model, saying, 'Our mission is to provide valuable content to our users, building premier media communities. By continuing to expand our content offerings, and opening new media communities, we believe we are well positioned for future growth.' Mr. Schwarz also suggested that operating expenses had stabilized, resulting in higher net margins over time. We raised our target prices for TRFX to an $9-$11."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...