I often see all internet companies classified together and honestly it’s just not right to group them all together. One of the categories that is easier to understand is the web content companies. These are companies that are basically media companies, they do not sell products or services, they generally do two simple things:

-Produce content
-Sell advertising

Of course, some companies are larger and have other activities but I would say that in general, their main revenue generator is advertising. Among the companies that I track, here are the main companies I would describe as “content companies”:

IAC Interactive(IACI)
WebMD(WBMD)
The Knot(KNOT)
YHOO(YHOO)
AOL(AOL)

What are these content companies?

Basically, these companies profits depend on:

-Revenues which are driven by:

-Visitors
-Advertising rates

-Expenses which are driven by:

-Cost of producing content
-Advertising expenses

Apart from Yahoo and AOL, I would consider these companies/websites to be very targetted and thus capable of getting high advertising rates. But that being said, traffic remains the core, especially when it is “organic growth”. Buying traffic is easy but not very financially viable long term. So the key is getting increased traffic with quality content. You can see graphs of Yahoo traffic (amazing how much steam it has lost in recent months) as well as a graph for WebMd and TheKnot (look at variations only, obviously many more users looking for medical advice than planning for a wedding). It is more difficult to do for companies like AOL and IAC Interactive which have dozens of different properties. Just take a look at IACI websites to get a feeling.

I have said it before and will say it again, I think it is increasingly difficult to be competitive when building websites in so many fields. You have dedicated teams working on one specific niche or subject and it becomes very difficult for “web conglomerates” such as Yahoo, AOL and IACI to compete. So yes, I have been doing and will probably continue to look for trades that will put me long a specialty website and short a web conglomerate.

Just out of curiosity, I did some comparisons between the two groups for a few different financial items (since AOL was only recently spun off, it id not included for lack of data):

Sales growth:

That being said, buying Knot(KNOT) at the current P/E ratio seems unreasonable (which explains why I am currently short) but I think by waiting for more “ideal” valuations, there are many trading opportunities. I do hope to add more of these companies to my trading radar in the future which will give even more possibilities.

The main risk that I see is always that since these specialised websites are more of a “One trick pony“, if a major competitor jumps in, they are obviously more vulnerable.

Do you agree that in general, these web conglomerates will underperform other specialised websites?

I have written a few series about ETF’s but this time I went for another side of the story! I have been public about my good feelings for ETF’s and why they will eventually take over mutual funds but one of the most amazing things is how many different things can be done with ETF’s! You can do leveraged, inverse or straight but also invest in commodities in general or in a specific one like Oil, Gold, Copper and so many others!!

You can compare the fees charged by each but also returns and obviously this might give you a few different investment ideas!  Will you need more research? Obviously yes! But this can be a good starting point to finding the best ETF’s for 2010!

So without further wait, here are the ETF’s divided by sub-categories!

Agriculture

Lots of believers here think that as the global population continues to grow, foods like rice, soybeans and sugar will become in demand with little flexibility in supply… Resulting in prices going up!!!

Commodity

Instead of investing in one specific commodity and trying to pick the right one, many choose to go for broad indexes as countries like China buy up everything available pushing all prices up. That is basically what has been happening in the past few years! This is also a play on the dollar as commodities are generally inversely correlated to the dollar!

Energy

There was a recession but as thongs get back to normal we will get back to the debates about energy and the lack of it compared to exploding demand:

Oil

The resource that makes the headlines! It is volatile, makes the world run and is in short supply (even to those who do not believe in peak oil!)!

Natural Gas

Think oil is volatile? Try natural gas which has been gaining popularity in recent years thanks to speculators mainly!! UNG has made more headlines than any other commodity ETF but as you can see below, there are other options!

Dirty energy and nuclear

I know, they are not the same but just for presentation purposes, I am presenting them together. Think coal is dead? You are dead wrong and these ETF’s will be proof of that!

Clean Energy

Are you green? You might be tempted of investing in these for social reasons but as the environment becomes more important, clean energy companies will benefit big time, the big question is when…

Gold

Gold has been discussed over and over here and elsehwere, it remains very debated and has lost a lot of value in recent months but as inflation threats remain, it will remain a very discussed investment. Among possibilities are GLD, by far the biggest ETF on this list!

Materials

Not much explanation required, if you believe the economy is back on track, you will want to get your hands on materials!

Metals

Every time you hear about China’s massive city buildings, try to picture all the metals involved! They are more and more in demand with often very limited supplies!

Silver

Because it has gained so much importance in recent years, silver warrants a category of its own!

Water

I had written about water a while back, it remains one of the promising areas and is viewed increasingly as a “commodity”

Others

And finally, those that do not fit any other category

Goldman Sachs recently published its list of the stocks most commonly held by Hedge Funds as of the end of last quarter which obviously makes a very interesting list. Hedge Fund managers are generally regarded as the best and smartest investors. Why? Because generally the best managers will end up there where high returns are best rewarded (in terms of pay of course!).

Looking through the list, I’m not surprised to see the 3 big technology giants in there with Apple(AAPL), Google(GOOG) and Microsoft(MSFT) all among the top 6 names owned. Apple has not been as unanimous since the announcement of its Ipad but I do think it remains a good pick (and do have a trade on Apple right now).

Pfeizer(PFE) at #2 is not that surprising either. While many point to its lack of new products, there are many things to like about it, especially its dividend yield which even after some decreases, remains very high (around 4%).

There are also 4 financial institutions, Bank of America(BAC), JP Morgan Chase (JPM), Mastercard(MA) and Wells Fargo (WFC). Honestly, I find it very difficult to judge these financial institutions right now. I had written about an Bank of America investment being similar to a visit to the casino and while things have improved, it’s still difficult to judge these stocks.

The final two stocks, I do not know as much about, as I have not considered investing in either DirecTV(DTV), or CVS Caremark(CVS), both are consumer players and could be viewed as defensive plays.

Buying or Selling these stocks?

The big question now is that with this info, would you rather assume that most of these funds are wrong (and sell) or jump on the bandwagon and get long assuming these guys are the brightest and they will probably turn out right? It’s actually a very difficult choice but I personally do not move either way really. I do think it’s interesting to see and am happy to not see Amazon (AMZN) on this list since I am short on the stock, but would I change my investing decisions based on these? I don’t think so no. How about you?