Category Archives: $YHOO

2CentView Performance in 2015

The 2CentView portfolio was up 1.5% and flat if you exclude dividends for 2015, which matched the S&P500 but above the FTSE100 which was down 5%.

The portfolio was up nearly 10% mid year, but then the Chinese stock market plunged and was followed an amazing drop in commodity and oil prices, the scale of which no one predicted, sees stocks like Anglo American, Glencore and BHP Billiton drop to record lows.

The objective of the 2CentView system is to outperform the index in rising markets and be at least in line when the major index is flat or falls up to 20%, and outperform if the market corrects more than 20%. The portfolio is benchmarked vs. the SP500 (50%, flat ) and FTSE100(50%, down 5%), so the outperformed by 2,5% in a flat year. Overall return since 2013, 74%.

The exposure to USD/GBP exchange rate is also something to keep an eye on – and 2CentView started using the PUS3 3x Leverage ETFS Short USD, Long GBP to hedge foreign exchange risk, locking in at 1.52.

Where it did badly:
2 Core positions were savaged – SAVE (down 60%), $YHOO (down 50%), $TWTR (down 50%) which cost the portfolio nearly 5% – 2CentView exited these positions, when the 50% threshold was hit. $ACA (Acacia Mining – Gold) was also down 40% due to lower gold prices.

Trades in $AMBA (Amberalla), $GNW (Genworth),$KORS (Michael Kors), $BHP (BHP Billiton) and $AAL (Anglo American) were all stopped out. In the case of $GNW, $BHP and $AAL, these stocks continued to fall and the stop loss system saved the portfolio from losing a lot of money.

Trades in $FIT (FITBIT), $HSBC were hit their targets and were profitable.

Core positions which did well: $FB up 40%, $MRKT, $DLG (Direct Line, up 30%+dividends),$NFLX (NetFlix), $TWOD (Taylor Wimpey, up 50%), $GOOGL up 60%.

Other core positions in $AAPL, $NASDAQ:AAL (American Airlines), $SWKS, $MS, $CELG and Ionis pharma were fairly flat.

Main lesson learnt from 2015 – STICK to your stops – downward moves can be savage – Analysts forecast can severely LAG the market on the downside as well as the upside, so do not fight the market, exit at your stop, re-evaluate and come back in lower down if you still like the stock.

Happy 2016 from the 2CentView team.

$YHOO FV=39 but is is all the baggage worth holding ?

Last Tweet on $YHOO (may 21) said that below 37 the trade could be on …with stock closing at 36.5, see FV=39 as follows:

$BABA Stake = $32.34 ($BABA=79)
Core Business = $2.5 (10x multiple)
Cash = $4
Yahoo Japan = $6.5 (assumes 20% tax rate)

FV = $45.35 (zero tax rate on $BABA Spin off)

So if $BABA is taxed at 38% then value FV = $33
taking the MID of these 2 you get:

2CentView = $39

Holding Yahoo means you are exposed to:
– Alibaba Stock
– Tax rate on spin off – if fully taxed stock will drop to $33
– Yahoo Japan and assumed tax rate of 20%
– A Core business which is proving very difficult to grow revenues
– Cash which could be thrown away making acquisitions which try to make the core business more profitable

That’s a lot of Baggage – and the reason why 2CentView exited it’s core position in $YHOO at 43.

May consider getting back in at $35, where the baggage maybe worth holding!

$YHOO – the valuation range for dummies…

Need to Look at $YHOO as the 4 parts – $BABA stake, Yahoo Japan Stake, Surplus Cash, Core Business (Digital advertising) – which bear in mind was the reason $AOL was bought by Verizon.

High End:
$BABA Stake = 384 million shares * $91 / 938mm Shares outstanding = 37.25
Yahoo Japan Stake = $9 taxed at 20% = $7
Cash = $6
Core Business = $5 (based on AOL multiple)
= $55.25

Low end:

BABA taxed at 38%, Cash is worth $3 ($3 wasted on failed acquisitions to get core business to be more valuable) , Core Business = ZERO = $33.5

So $YHOO Value range is between $33.5 and $55.25 – depending on Alibaba Stock price, tax rate on spin off and how much you think the core business is worth, and how much Cash is left for repurchases/dividends.

2CentView FV is the MID of the 2 ranges = 44.375 – which is line with the stock price!…..If it drops below $37 the trade could be on…

$YHOO shares drop following IRS Review of Spin off tax rules…FV Update

Tweeted back on Jan 28th not to take the spin off for granted and that it could be subject to the government stepping in like they did with Tax Inversions – the dramatic drop in Shire shares following the failed Abbvie take over hurt a lot of hedge funds – and was the warning.

See article on Seeking Alpha Below:

http://seekingalpha.com/news/2533856-yahoos-plunge-alibabas-rise-due-to-potential-irs-spinoff-rule-changes?app=1&auth_param=efe0c:1aln78m:a1f1d46d87aa9f113e8aae48f0ac4532&uprof=37#email_link

Where does this leave Yahoo?

FV = 46.4 vs $BABA=88 – assumes spin off would be tax free – if subject to 38% tax rate

Fair Value could be as low $35. Worth revisiting $YHOO if it drops below $37.

2Centview exited $YHOO position end of January 2015. Risk in the spin off not happening was too high and the core business does not seem to be something Mayer can turn around!

$YHOO – What next now spinCo announced and why is stock lower ?

After rallying in the after market 7% $YHOO stock is down on the day! Those who bought in the after market could be down as much as 10% on the day…

Why is the stock lower?

Yahoo’s value is made up of
– 384 million shares of $BABA = 37.5bn
– 8bn in Cash
– between 5bn and 9bn stake in Yahoo Japan – depending on tax assumption
– A core business worth between 3bn and 5bn

So $56bn assuming mid values of Yahoo Japan and the Core Business.
So why is the market cap only $45bn?

The discount is probably due to:
– the fact that the majority of the value in Yahoo is $BABA and if you want to own $BABA just buy $BABA Shares
– the Spin off wont happen till the end of the year – and has the risk the government may make it illegal – like they did with tax inversion take overs. It also may face resistance from Alibaba as it could create additional stock volality.
– Not all the cash will be returned to share holders – and much of it could be wasted on more bolt on acquisitions which add no value to the core
– The core business is still struggling to grow even though Mayer was encouraged by mobile ad growth revenue it did’nt really convince investors that the core was turning…

So investors see  Yahoo as dead money with risks attached and will never see the full $56bn of value…

2CentView has a core position in $YHOO. At this point the market is probably right in how it sees Yahoo – if it goes below $40 with $BABA at a $100 then the trade from last year is back on – but between $40 and $50 there is no trade. Decide whether you want to hang on – if better opportunities arise it maybe worth selling the core.
Mayer probably sees her job has been done – which was extracting shareholder value from all the assets inside Yahoo and having a go at building the core but not succeeding …Considering she took the job when the stock was $15 she has done a great job – with a bit of luck on her side (the $BABA IPO!)

2CentView performance in 2014…

The 2CentView portfolio was up 12% fo the year, which matched the S&P500 but well above the FTSE100 (flat).

The portfolio ended the year 75% US and 25% UK 0% Europe – mainly because the US was the only market showing real jobs growth and a rising stock market – the model also showed many more opportunities in the US than outside the US. The exposure to USD/GBP exchange rate is also something to keep an eye on – sterling strength representing a buying opportunity for US Stocks – but can go the other way!

Where it did badly:
2 Core positions were savaged – Blinkx (down 90%) and $TCG (thomas cook) which cost the portfolio nearly 6% – need to do a better job managing zero cost core positions – where you can take your eye of the ball.

Europe and US House & Autos  continued to underperfrom and took losses in Deutsche Bank, HSBC and $USG and $GM – all go cut on the 25% Stops (they continued to go lower – except $GM which has come back – thanks EBOLA!)

Also took some losses in $FUEL, $GIMO, $ICPT on the rotation out of expensive growth stocks into more low growth stocks – growth positions are the riskiest and hardest to manage as moves can be savage.

Where it did well:
$AAL- American Airlines, $SAVE did very well up nearly 100%
$FB up 37%
$CELG and $ISIS – up nearly 80%
$YHOO – up 40% – easiest trade of the year!
$AAPL – up 50%
$MS – Morgan Stanley up 30%
Rite Aid and Radian also performed well (core positions from 2013)

2014 was in general lot tougher than 2013 as the market experienced volatility throughout the year – Russia/Ukraine, EBOLA, Oil price collapse – all tested the nerves – but also represented buying opportunities.
The 2CentView strategy of taking some profits, setting stops helps build low cost positions and mitigates losses from positions not working – this really helps in managing volatile markets – and helps you sleep at night – we all have day jobs!
Overall the portfolio is up 73% since beginning of 2013 when the model and strategy was first built.
Main lesson learnt from 2014 – be more selective and if a core position drops more than 30% – start to exit – even if it is because of a malicous blog!

So 50% of the portfolio was up average of 51% =25.5% on the winners
30% portfolio down 25% = -7.5% on the losers

6% loss on core positions in $BLNX and $TCG

Net=12%

$YHOO surging since results on back of $BABA and the tax experts plus some hope in the core..

$45 target hit – take some profit here. Keep a core.

Since the results and the conference call, Yahoo has been surging – Mayer spoke of being good guardians of Yahoo’s cash pile and finances.
They have bought back stock wisely and also spoke about spinning off the remaining $BABA stake in a tax efficient manner.

The $YHOO trade was a no brainer and really and shows how the market can mis-price stocks – very little down side and lots of upside!

Keep a core position – stock could go higher when they announce the plans for $BABA in January – the tax experts are hard at work right now!

$YHOO – is the core business turning – Mayer thinks so – then again she would…

$YHOO announced results after the bell and produced a record quarter on the back of the $BABA sale.

However, revenues – the top line, only grew small – but Mayer was bullish on it’s outlook for Mobile – which is starting to generate revenue and also Tumblr..

But then again she would be – Marissa Meyer is under pressure as activist investors are circling and want to realise the full value of the business – which right now is between $45 and $55 a share.

As a shareholder with a core position I want $YHOO to become another $GOOG or $FB and see the stock go to $100 over the next 2 years – not take $50 now – but can this be done and is Mayer the person to do it?
She is very young for a CEO but 2CentView is she should be given time and use the money to make the right acquisition and then position the company for growth – it has the sixth largest amount of internet traffic in the world – it just needs to be monetized. Not sure how though. If she makes the wrong acquisition it is game over.

2CentView has a core position in $YHOO.

$YHOO – at $41 what is the probability of a merger with $AOL?

Mentioned in the last tweet $YHOO could be worth as much as $56 – but this does assume all the sum of the parts can be fully realised which it can according to Starboard the activist investor who want it to merge.

A base case valuation would be:

$BABA Stake = 15% of 217bn taxed at 38% = $20bn =$20

Cash = $8bn – 50% returned to Shareholders the other 50% wasted on failed M/As = $4.
Yahoo Japan stake = $9 – also taxed at 38% = $5.5

Core business = $5 let’s say it’s worth $2.5

Base Case = $32

Blue Sky Case = $56 assumes $AOL Merger, $1bn cost savings and tax efficient spin offs of $BABA and Yahoo Japan.

If the stock was trading at 44, chance would be 50-50 – so around 41 market is assuming 46% probability of an AOL Merger…

$YHOO – undervalued companies with quality assets will not go unnoticed by Activists…

Activists are becoming more influential and cannot be ignored by CEOs – even Tim Cook and the goliath Apple did not ignore “david” Icahn calls to return cash to shareholders – which Cook responded to and resulted in a 40% rise in $AAPL stock.

Friday, activist Starboard called for Yahoo to merge with AOL – and not waste the cash on more bolt on acquisitions – which are clearly not working – the fundamental problem with Yahoo is that it cannot significantly monetize it’s large user base – which is the sixth largest..

Marissa Mayer will start feeling the pressure to unlock shareholder value – especially if ICAHN joins Starboard’s calls for an AOL Merger…

Link below good article outlining the possible options for Yahoo.

http://seekingalpha.com/article/2524105-mapping-out-potential-scenarios-for-yahoo-inc?uprof=37

Yahoo FV = 50 , Short term price target 45.

Stick with Yahoo and buy on dips below 40.

2CentView has a core position in $YHOO and added a trading position in $YHOO at 39.