Intelligent Speculator

In this first full week of the fourth quarter, I’ve already announced two stock picks, first going long Apple(AAPL) against Intel(INTC) and then on Wednesday going long Ctrip(CTRP), short Expedia(EXPE), and it is now the time to do my third pick of for the fourth quarter, an internet advertising play.

These are two companies that I’ve picked in the past so regular readers will not be surprised that I have decided to go long Google against IAC Interactive. This is more of a relative play than a plaay on Google because really, Google has already increased so much in recent months that it is difficult to say how much more it has to go in the current environment that is very challenging for media companies as advertising budgets have decreased drastically.

Going for Google is the fact that it keeps innovating and growing. Its mobile position is very strong and it has also recently put more emphasis into:

-Maps (with advertising starting to be added)

-Books (with their much publicised deals)

-Android (its operating system)
-Video (Youtube)
-Better use of its all powerful data
-Operating system

Going forward, I expect Google to continue to outperform the market but especially its web only competitors that are too reliant on web advertising. Sure, Google is almost 100% dependant on advertising but is has became such a key player that most of the industry still expects it to pick up more business even in such a downturn because of companies trying to move where their advertising dollars perform best, which is usually on Google.

IAC Interactive on the other hand is a company that has struggled for years after going through many acquisitions to increase its business. It never did succeed in getting most of these off the ground. Ask.com, Expedia, and many others are more know for what they were than for what they now are. IAC is now very active in the dating industry that is very difficult to compete with because you are basically competing against others that are willing to offer your product without charge. Just take a look at the last few earnings announcements by IAC and you will see what I mean; they are not headed in the right direction… They have actually seen revenue decrease in 4 straight quarters. No matter what the economic situation is, a technology company should be able to avoid such a performance.

So there you go, my 3 picks for Q4!