A Digital Ad Powerhouse

Shares of The Trade Desk (Nasdaq: TTD), provider of a data-driven digital ad buying platform, are among those that have fallen hard this year – presenting an attractive opportunity for long-term investors.

Even after a recent 19% bump following a solid earnings report, shares were 54% lower than their 52-week high.

While most advertisers are struggling with the looming possibility of a global recession, The Trade Desk is growing at a healthy clip.

The company went public six years ago and has crushed the S&P 500 over that time; it was recently up over 1,500%.

Moreover, the company was only founded in 2009, yet it already has nearly $1.5 billion in trailing-12-month revenue.

Simply put, it entered the ad space and quickly took market share.

In its third quarter, The Trade Desk generated revenue of $395 million, up 31% year over year, but management projects slowing growth for the next quarter.

The company is scaling up, anticipating growth.

But if the global economy sours, The Trade Desk could be left with steep losses.

There are risks to any investment, but even with nearer-term macroeconomic uncertainty, The Trade Desk is a stock worth owning for the coming decade.

(The Motley Fool owns shares of and has recommended The Trade Desk.)

Ask the Fool

Q. I see that Twitter is now a private company, as Elon Musk bought it. What happens when a company goes private? – G.W., Provo, Utah

A. Companies “go public” when they issue shares to be traded on the open markets.

Going private means their shares are delisted from the stock exchange and are no longer available to ordinary investors.

A common way that companies go private is when they’re bought by private equity firms.

Whether an individual or a firm buys the company, the existing shareholders receive payment in exchange for their shares.

Operating as a private company has pros and cons. Being public can cost much more, as public companies must file regular, detailed reports with the Securities and Exchange Commission and other regulators.

Private companies can keep much of their business private. Shareholders have some say in how public companies are run, but a private company can be completely controlled by a single owner – such as Musk.

Q. What’s “goodwill”? – S.B., Lexington, Kentucky

A. It’s an intangible asset that you might see on a company’s balance sheet if it has acquired another company.

When one company buys another, any sum it pays above the net value of the acquiree’s identifiable assets (perhaps to fend off rivals trying to buy that company) is recorded as “goodwill” on the balance sheet.

Goodwill represents nonquantifiable intangible assets, such as a base of loyal customers or a well-regarded brand.

There are more quantifiable nonphysical assets that can also show up on a balance sheet, as “intangible assets”; these might include licensing agreements or proprietary technology.

Such intangible assets can be sold. But though goodwill may be impaired at some point and thus devalued, it remains with the company and can’t be sold off.

My Dumbest Investment

My dumbest investment? Well, I only did trading; I forgot to invest. I also used to trade based on recommendations from business channels. That was the dumbest part. – D.T., online

The Fool responds: You point out a critical distinction: Trading and investing are far from the same thing.

Yes, when we place “buy” orders and whenever we sell, those transactions are called trades – but ideally they’ll be the relatively infrequent trades of long-term investors.

For best results, most of us would do well to find well-managed, growing companies and invest in them when their shares are undervalued, aiming to hang on for many years (if not decades), giving them time to grow.

In contrast, there are more active traders (including day traders) who jump in and out of different stocks frequently, often without knowing much about the companies in which they invest.

That can be risky.

Following others’ recommendations, however, isn’t necessarily dumb – as long as you do your own research into each portfolio candidate as well.

Remember that not every pundit has a good track record, and that not every recommendation is good for everyone.

Some might be risky stocks, for example, and some might be meant for holding only a short time.

Focus on the long term, do your research and be an investor, not a trader.