On my last post about which stocks to buy next I mentioned that I might decide to buy YHOO. Well, I did indeed buy 300 shares of Yahoo and paid $36.79 per share. I wish I had waited a day to do this as the stock has already gone down about a dollar but that is the way things go! Buying stocks over the years has made me realize that I have to get used to it.
8/27/2014 Update: I bought 300 more shares of YHOO this morning after Alibaba came out with great earnings overnight. I now have a total of 600 shares at an average price of $37.44.
This is NOT my normal long term stock buy and it is speculative. Yahoo doesn’t pay a dividend and their business isn’t doing that great. If you notice, I only bought about $11,000 worth of the shares and all my other stock purchases have been for more than that.
The Three Reasons I Bought Yahoo Stock
1) Yahoo owns 24% of Alibaba and during the last earnings call they revealed that due to a new agreement with BABA, they will get to keep more shares of the stock than originally planned. You can read more about that here. YHOO has already popped on this news so buying it today is a bit late. But as I will explain below, I think the Alibaba IPO will be huge and investors will want to buy Yahoo in August before the BABA IPO date.
2) Could Yahoo get bought out sometime in the future by Alibaba, SoftBank, or some other company? This news opinion story was published last week and resulted in another pop for the stock.
3) I believe the Alibaba IPO (now strongly rumored to take place in September 2014) will be the biggest IPO in history on the New York Stock Exchange as investors from around the world buy the stock. This may lead to further gains for Yahoo, especially now that they are being allowed to hold on to more of their shares. The bigger the IPO valuation for Alibaba, the more valuable Yahoo’s stake will be.
The Bottom Line
Simply put, the Alibaba IPO is getting a tremendous amount of attention and interest from investors worldwide. A beneficiary to that before the IPO will be Yahoo stock which I hope will rise into the $40’s. I think that Alibaba’s valuation after the IPO will be closer to the high side of estimates and that will bode well for the portion that Yahoo owns.
Additionally, there is an outside chance that Yahoo will be bought out and if that happens, it would presumably be at a higher price than I paid for the stock. I’m not counting on this happening though. I believe this will be a short term stock purchase which is uncharacteristic for me as most stocks I buy I prefer to hold on for years if possible.
**Please be clear that I am not recommending you buy Yahoo stock. I am merely explaining the reasons I did and I could be wrong and lose money on this stock pick. Please consult a money management professional or your stock broker before you take action on anything you read on my blog.