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October 20, 2007



Agree w/you, Frank.

In totality, Yahoo's "raw assets" arguably surpass those of media-darling's Google's.

Despite their sub-par stock valuation; which in no way fairly represents their inherent value; they remain, paradoxically, at once both an Internet giant...and an Internet diamond in the rough.

I wish the company and all their hard-working employees all the best in the months and years to come.


I've been reading your blog for a while now.. great stuff.
Howeveer, i'll have to totally disagree with you here....

"Companies with high stock valuations and a "can do no wrong" sparkle, that's one thing. Companies with great assets who can't get any love .. that's an opportunity."

One of the best, oldest and most widely used metric for evaluating stock value is P/E (price earnings ratio) which is pretty much Ratio between the share price and earnings per share. The higher the P/E, the more "valued" a company is. The average P/E ratio for S&P 500 companies is currently 14 - 16

As of the closing bell on Friday the 19th,
Yahoo's P/E is 56.48 while Google's is P/E 52.39. So even thou Yahoo's current stock price is $29.03 per share and Google's $644.71, yahoo is still more "expensive" (ie overvalued) compared to Google.

I agree they are both overvalued compared to the rest of the market but yahoo is even more so. In fact, using all other metrics like growth multiples. etc .. Yahoo beats out Google in the race for the craziest valuation.

So, the fact that Google trades at a lofty $644/share and yahoo a measly $29/share doesn't make yahoo cheaper.. it is indeed more expensive.

***FS*** Fair comment Frank.. many value investors get caught up in intrinsic break-up values of assets.. What's the "burn down value" and how does a company make its revenue.. A firecracker in full explosion at 9X is not as valuable as a firecracker with a lit fuse at 15x .. that sort of thing.. It's not just the revenue, but "how" a company makes its rev and what the upside and break-up value amount to. Either way.. I agree it's difficult to pick a value-line when you're on the outside looking in through dirty glass.

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