Rubber Meets The Road

Yesterday (6/11) Apple made an announcement regarding security and privacy functionality to be incorporated to the next roll of their OS (or the following roll - but that’s not important). Among the revisions will be a user accessible software “switch” providing the ability to turn ad-blocking on/off.

The immediate impact of this announcement was to drive Criteo’s stock price down about 10%. My first reaction was dismay. After having performed pretty thorough due diligence on CRTO in which I examined the business (which has always been my approach in the past) and the important financial information (which I often disregarded in the past), I decided that CRTO was a good investment and bought enough to make it a healthy percentage of my portfolio. This all took place in the very recent past, only a few months.

I’m now looking at one of my major positions getting beaten up pretty badly. And to be honest, I’m somewhat disheartened. I’m thinking, that was a screw-up. What should I do? Take the loss and get out before it get’s hit any harder?

I read the posts here on this board which is incredibly real-time responsive to events of this nature. This helped me get a a better perspective on ad blockers - and I remind myself that in fact I have an ad blocker installed on chrome, my primary browser. I’m sure I’m not the only person out there with an ad blocker. It doesn’t seem to impair Criteo’s business.

The reality is that Safari is just one of several browsers. And the fact is that the number of Windows machines far out-weigh iOS machines In order for this new functionality to negatively impact Criteo I surmised that nearly 100% of Mac users will have to upgrade to the newest iOS version when it becomes available and then all of them will have to elect to turn ad blocking on. All in all, I think there will be snowball fights in hell sooner. Even if the aforementioned happens, it’s debateable as to how much of an impact it might have on CRTO’s earnings. The Apple announcement will not impact CRTO. I expect another stellar quarterly report in August, and the quarter after that, and so on for many quarters to come.

So what at first blush that which was cause for dismay and disappointment now becomes realization the CRTO is on sale and a pretty hefty discount.

But, where does the money come from?

So happens that I recently sold my SBUX and KMX and had not fully deployed the money. The day before CRTO went on sale, there was a discussion on this board about Solar Edge. Without too much analysis (OK, really without any analysis) this looked like a promising place to place my money, so I bought up a bunch with the idle cash.

But then this situation with CRTO came up - a company I had devoted time and energy to. I had employed my newly acquired investment knowledge. I had to decide if I truly had confidence in the analysis or not. I sold the Solar Edge I bought the day before. I put in a limit buy order for CRTO at $45.50 which executed yesterday afternoon. As I write this (10AM PDT) CRTO is at $47.40, it’s been over $48 earlier this morning.

Solar Edge might turn out to be a good investment, the difference is that I have confidence in my CRTO investment. I know exactly why I bought it. Solar Edge was not an investment, it was a tip. OK, the tip came from Saul, an unusually reliable source, but he didn’t actually say go buy it, he said it’s worthy of consideration. I hadn’t done that. I impulsively bought it.

So the rubber and road meet.


Regarding SolarEdge, you state:

OK, the tip came from Saul, an unusually reliable source, but he didn’t actually say go buy it, he said it’s worthy of consideration.

I’ll let Saul answer for sure, but from his original post in this thread he said:

I looked at the company, whose name is SolarEdge (SEDG) and decided to take a small (but not tiny) position.

Which does sound like he bought it.

I went through all of the exact same frenetic self-re-analysis in the span of about an hour yesterday.

First - why is CRTO falling so quickly after being on a steady march from $40 to $50+? Then I found out why – the IOS9 announcement (which wouldn’t even make page 48 news except… Apple and the media fanboys that seem to hang on everything that comes out of Apple).

Then I did the analysis in my head as to whether it changed the fundamental story for CRTO. IOS9 being able to (not out of the box, mind you) block ads does not, in my opinion, change their story one bit for at least a year, and I’m betting very little beyond that.

I then made a guess as to where the price would be in a year, after the day’s news washed out, and decided that $55-$60 was probably do-able. I re-checked my 1yPEG data. Shortly in front of this, I found that CRTO had been upgraded by one of the analysts (JPMorgan if I recall), and they had a target of $60.

Figuring that my analysis was ok, and taking into account that the analysts probably did NOT factor in the IOS9 announcement, I figured CRTO was having a one-day sale and placed an order for 1.5x more than I already owned at $45.50. Today that’s up about 3.5%, and anyone who bought after me might have picked up shares in the $44.50 range and got an even better deal.

My conviction on CRTO hasn’t changed, and I put my money where my conviction is, same as you.


Yes, you’re correct. Saul posted I thought it was worth looking at at least so I’m going to repost it and that’s what stuck in my mind.

But, that’s sort of beside the point that I was trying to make. When I bought Solar Edge it was essentially buying on a tip. I hadn’t done any research or analysis. I just took what somebody else said about a stock and pulled the trigger. The fact that I have a lot of respect for Saul doesn’t justify my action. Saul has asserted over and over again that we shouldn’t just copy him (though he does post his positions). He constantly encourages us to do our own analysis.

It’s kind of like the story about giving a fish or giving knowledge of fishing. So maybe I’ll do some analysis of Solar Edge and decide that it’s a good investment. Then I’ll have to decide if it’s good enough to sell something else in order to make the cash available - maybe I’ll end up selling some CRTO as I’ve got a very long position in this company now.

But the rubber on the road I was talking about was taking action based on my confidence in the analysis I had performed rather than buying something that somebody else suggested.


brittlerock said:

“Solar Edge was not an investment, it was a tip. OK, the tip came from Saul, an unusually reliable source…”

That’s a good reminder. The first time I followed Saul on a stock he was interested in I lost 90% of my investment in less than 6 months.

It’s not always gonna be as good and easy as SKX and SKWS…