December 12, 2007

IACI - Market Sentiment & Stock Prices

In 1999 I bet on search and online ad networks by owning DoubleClick and Inktomi stock. Both stocks went to crap because they were incomplete stories and I bought just before a market crash. The funny thing is, now I make a living off of search, and those two bets were right, they were just at the wrong time in the wrong company. Luckily I was able to get a couple shares of Google the day they launched.

Since getting took to the cleaners with my 1999 stock buying I noticed that every trade I made in 2006 made money. Which is a side effect of an up market, but also of decent trades.

After growing and marketing a few successful websites, reading Alan Greenspan's book, and reading Paul Kedrosky's blog it is easy to appreciate market sentiment, and it's influence on prices.

Recently I thought of a few stock moves that made sense to me that would pay off, and one that didn't.

A couple days ago I said BankRate looked cheap. Since then the stock went from $37 to $47. They were dragged down by the mortgage mess, but given their market position they are more of an ad based company, and less of a mortgage services company. Given their dominant position in Google and near monopoly on their market their value is only going to increase unless Google decides to offer similar services directly. Google has chose an organic leader for that vertical, and that leader is Bankrate. Bankrate has also extended that market leading publisher position by buying content sites and an affiliate network.

Before Countrywide posted last quarter's results I thought they would pop up after the results were announced because the market had priced so much uncertainty in the stock. They lost about twice as much as some people were expecting and their stock went up about 25 to 30% that day. Since then the stock has fallen further, but nice flip point that day was for some savvy traders.

A couple years back IAC spun out Expedia, which is up about 60% this year. IAC's stock dropped this year while many of their business interests are in near monopoly positions (like TicketMaster) or tied to the growth of the web (like Ask). While the web has grown over 20% year on year, their stock is down over 25%. Some of their assets are tied in home shopping network and LendingTree, which are holding back the true performance of the high growth pieces of the company. When Barry Diller announced the split up of the company into 5 pieces the stock was up about 20%. But the stock is back down where it was before. Buy. Buy. Buy. Barry also stated that the Ask ad deal with Google was worth over 3.5 billion, and the company as a whole is worth less than 8. I just loaded up on some IAC at a good entry point AFTER 2 great news points.

When Marchex (a domain name holding company) had a bad quarter their stock dropped to $9 a share and I bought some just before jumping on a plane to go meet Frank Schilling (the #1 domain investor in the world). The company is still mismanaged, so it might be time to rotate out of their stock. If they would just sell a few of their names AND develop a few of their premium names properly their value would shoot through the roof.

My one dog pick was JupiterMedia. I bought some of them just before their last quarterly results, which in fact were not that great. That stock was down about 25% from my entry point at it's worst, but then the CEO started buying, and now it is off about 10% from my entry point.

Investing is nothing but a guestimate of risk vs reward, and the smart gamblers normally play in markets where they have an advantage over the market. As an internet marketer I am pretty good at seeing web related trends. By far and away the best investments I have ever made were in my knowledge and my websites.

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