Yahoo! and the Future of Online Travel

A Travelzoo spokesman did not return a call for comment.

Travelzoo's ascent has impoverished enough bears to make clear that absolutely nothing should be relied upon to damage its shares seriously. The stock lost $3.26 to $51.14 Wednesday, one day after rising 28% on no news whatsoever.

It's been that way with Travelzoo since the spring. The stock is on a tear, up 530%, as the once little-known company is fast becoming the new favorite stock for fast-fingered momentum investors and day traders.

As was reported here before, the stock owes its fantastic run to a combination of hype surrounding Google'sGOOG initial public offering, an industrywide revival in Internet advertising, and a scarcity of shares.

Ralph Bartel, the company's 38-year-old founder, chairman, president and chief executive, owns 87% of the company's 15 million shares.

So, with only 2 million shares available for regular trading, Travelzoo's low float makes it difficult for would-be short-sellers to find a broker willing to lend them shares. Those that have managed to short the stock are often forced to cover their positions when Travelzoo goes up.

Trading in Travelzoo has recently been so heavy that it now is regularly trading more shares a day than its float. On Tuesday, 4.6 million shares changed hands.

The surge in Travelzoo's stock has left it with an outsized valuation for a company with $2.3 million in net earnings during the first half of the year. The stock trades at a price that's 300 times trailing earnings.

Mihalos says fundamentals mean nothing to the traders who keep bidding up Travelzoo. But he says a bad ending is inevitable for investors who get lured into buying shares at ever higher prices.

"I think you have a bunch of traders who are playing games with this stock," says Mihalos. "It's sort of like a cat playing with a ball of yarn. But it's inevitable that this will end badly."