Updating The Stocks I Follow (YELP, SNDA)

By: ispeculatornew
Date posted: 03.09.2012 (5:00 am) | Write a Comment  (0 Comments)

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It has been a few months since there was any change among the stocks that I follow and as much as I would love to say that today’s update marks the addition of Facebook (FB), it’s not quite that exciting. For newer visitors to this blog, the stocks I follow are those that I usually track the news for and eventually make trades on. These technology stocks are not generally used for dividend stocks since most prefer to hoard cash (yes Apple, I am talking mostly about you) but rather for long & short stocks and longer term speculative picks.

If ever you have interest in these names, I highly recommend that you join our tech stocks newsletter, it is a free newsletter sent between 2-4/times per month on average.

Removing Shanda Interactive (SNDA)

Shanda Interactive is an upcoming gaming company in China. While I clearly have strong belief in Chinese internet stocks and have done well with some, it’s so difficult to trade them because of the lack of information. I have found a good source of news recently that might help but I’ve still been reluctant to trade these names recently. When I do, Shanda will not be part of it as the company was acquired by Premium Lead Co Ltd, a private company located in the British Virgin Islands from what I can see…I am removing it from the stocks that I follow.

Adding Yelp (YELP)

This is a much more interesting one. I did learn my lesson a few months ago after trading TripAdvisor (TRIP) and will not trade YELP right away but to me, this seems like a great opportunity. No, not a buying opportunity, but a great name to short. If you do not know YELP, it is a huge review website that helps users find critics and reviews of restaurants, and many other types of businesses. The business model is similar to TRIP actually but is a much broader website (compared to the travel direction of TRIP). I am generally not a big believer in companies that try to be the answer to such a large audience and YELP has been known for questionable practices that would make it very difficult for me to buy the stock.

Yelp IPO

Yelp started trading last week after a $15 IPO but started much higher almost instantly in a similar way to many others

Valuation Is Crazy

While I’ve said that you’d be crazy not to own Apple (AAPL), the opposite could be said about YELP. Why would you own a stock that has growing revenues but also growing losses and that trades at a valuation of $1.2B despite only having $80M in revenues for the year. The company lost over $1 per share in the past year and while there are certainly some scenarios where YELP would be a good buy, I think that LinkedIn (LNKD) which has a very similar profile (strong revenue growth, similar multiple for price to revenues, etc) is a much much stronger company. The main difference between the 2?

LinkedIn is already profitable and has been seeing increases in earnings while YELP is going into the opposite direction, has slower growth.

Oh and did I mention that while Yelp competes with the likes of Google, LinkedIn faces little to no competition? I mean honestly, I’ve had a hard time going long LinkedIn (LNKD) because of the high valuation but when I compare it to Yelp, it looks like an amazing bargain.

Believe me, if things do say close to this, I will end up going long LinkedIn (LNKD) against Yelp (YELP)…

So please, if someone knows a YELP holder, please ask them to explain themselves here? What am I missing? Is there a more obvious short?

P.S: As if things were not bad enough, there continues to be a lot of questions about Yelp’s tactics which will eventually backfire…

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