This morning grabbing a Barron’s off the rack was a bit different.  There I was expecting the cover to have calls for big new highs, but besides noticing the "top 100 financial advisors" was this week’s Internet controversy……

"It’s a good time to buy Yahoo!" was the first thing I noticed on the side of the cover.  Gabelli’s fund manager who cover’s the stock noted that it’s cheap, but "If you believe the forecast…".  Also a manager from Ironbridge noted that the market is not paying for any accelerated growth from Panama and the downside from any disappointment is limited.  This is a coin toss, no doubt.  Investors WERE betting on Panama and growth ahead, otherwise the shares wouldn’t have risen 25% ahead of earnings since the first of the year.  It sounds more like this manager was putting some icing on the "long and wrong" cupcake.

It is hard to wonder why they only covered this one from the good side because the market gave the stock a different verdict this week.  YHOO shares are down more than 14% since its earnings.  Stocks that get hit this hard after earnings on such strong volume usually have to drift lower after initial recovery attempts.  This traded 127 million shares the day after earnings, and that is 50% more than the 80+ million shares traded the day after earnings in January.  Investors clearly gave Google (GOOG) the thumbs up after it exceeded about every metric under the sun, so you can see where the money is heading.  We still don’t even know if Yahoo! is going to make a competing buyout for an online ad firm to compete with Google’s buyout of DoubleClick, or if they are just going to let it all ride on Panama.  The latest data out of comScore also showed Yahoo! losing ground to all other major search platforms in march, and that is AFTER the launch of Panama.

They could be right on Yahoo!, but most times investors have tried using the "cheap" or "value" cards on Internet stocks hahave been a reminder that Internet investors are after "coolness factors" and Growth. 

We called for Terry Semel to go at the end of 2006, and this stock would still probably benefit from his termination.  There is a reason that Yahoo! has Sue Decker do most of the apperances rather than Semel.  He’s got to fire on all cylinders from here on out.  Otherwise he better figure out how he can go back to movies in one of the new private equity backed studios.  Shares will probably get the "Barron’s Effect" pop ahead of the open on Monday, Yahoo! may have "value" to it.   But even if the markets are surging, it’s just too early to make a bullish defensive call.

Jon C. Ogg
April 21, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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