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TheStreet Open House

11 Stocks to Play the Groupon IPO

Travelzoo

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Probably the best stock to trade in front of the Groupon IPO is Travelzoo (TZOO), which informs millions of subscribers worldwide, as well as millions of Web site users, about the best travel, entertainment and local deals available from thousands of companies. This stock is off by over 25% so far in 2011.

Travelzoo has 24 million worldwide subscribes that it sends out weekly emails to regarding sponsored vacation and travel deals. Last summer, the company launched a Groupon competitor that offered local deals. Back in June, Benchmark said that Travelzoo could get a boost from a Groupon IPO. The firm said Travelzoo's Local Deal competes directly against Groupon and could generate $93 million in gross revenue in 2011.

One of the other reasons to play Travelzoo in front of the Groupon IPO is that the stock is so heavily shorted. The current short interest as a percentage of the float for Travelzoo is a whopping 55.7%. This stock could easily see a massive short-squeeze if the Groupon IPO catches fire.

>>5 Stocks Set to Soar off Strong Earnings

The way I would trade Travelzoo would be to buy the breakout once the stock takes out $34 a share with heavy volume. Look for volume that's tracking in close to or above its three-month average action of 1.09 million shares. Another way to play this would be to buy it off of weakness near $28 a share and anticipate the breakout. Either way, use a tight mental stop a few percentage points from where you buy it in case we don't see a pop in the stock off the Groupon IPO.

I also featured Travelzoo recently in " 5 Stocks Poised to Pop on Earnings."

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