I sold all 600 of my YHOO shares at a price of 42.05. I have a short term gain of $2,736. You can see gain detailed below (click for bigger picture).
Why I Bought YHOO
You can read why I bought Yahoo stock by clicking the link but basically it was because I thought the stock would run up in anticipation of the BABA IPO. Yahoo owns about 24% of Alibaba and it is turning out that that IPO may be the biggest of all time. Investors, whether they are new or experienced, seem to be clamoring to buy BABA and the hype is off the charts.
Yahoo stock has been going up because the higher Alibaba is valued, the bigger payday Yahoo will get. The more money Yahoo gets, the higher their stock may be valued by investors. I bought YHOO on two different days less than two months ago and the stock has been going up steadily which has made me very pleased. Its great when a plan actually works and I have a profit to show!
Why I Sold Yahoo Before the Alibaba IPO
I decided to sell a day before the BABA IPO because I honestly don’t know what is going to happen going forward with Yahoo’s share price. One would think that the higher BABA goes on IPO day, the higher Yahoo will go as well. But that may or may not be the case. There are may conflicting opinions about Yahoo and whether investors will stick with the stock or dump it (like I did). These are the scenarios that could happen:
1) Many/most investors of Yahoo are only buying the stock because of their 24% stake in BABA, not because they actually like Yahoo and feel it is a good company. So that makes it more likely that some investors will take their gain and sell real soon which could drive the stock price down. This is what I am mostly fearing and the main reason I sold my shares.
2) If BABA has a blockbuster IPO that sees its price go much higher than the initial $68 price, YHOO stock may go up. After all, the higher BABA goes the more money YHOO will get. So, YHOO could see a nice pop up if BABA has a big up day the first day (as long as there aren’t a lot of sellers as detailed above).
3) YHOO could still be bought by some other company. This could happen soon or months from now. If that happened the buyout price would most likely be higher than Yahoo’s stock’s price now and its investors would be rewarded nicely. But something like Yahoo getting bought out is very speculative and I am not waiting around for something that may or may not happen.
The bottom line is that I have a nice gain that I wish to protect, I have no idea what will happen to Yahoo’s stock price once Alibaba goes public, Yahoo itself has a very poor business that I don’t want to invest in, and thus I have decided to be on the safe side and sell at this time. I may or may not regret this decision in the future but I have to do what my gut tells me is the right thing to do right now. My goal was to make money on Yahoo in the run up to the Alibaba IPO and that was accomplished!