Thursday September 06, 2012
by Timothy Lutts, editor Cabot Stock of the Month
The New York Times recently agreed to sell the About Group, which includes the web site About.com, for about $300 million.
Most people focused on the Times. But fewer people took the time to look into the buyer, IAC/Interactive (IACI), for the simple reason that the company is not a household word. Yet it is a big part of our lives.
IAC/Interactive owns and operates more than 50 diversiﬁed Internet businesses in more than 40 countries.
These sites include Ask.com, Citysearch.com and Dictionary.com and social networking and dating sites like Match.com, Chemistry.com, Seniorpeoplemeet.com and Udate.com.
It also ha; ecommerce, through sites like Shoebuy.com and Outletbuy.com; and content, through sites like CollegeHumor.com, Urbanspoon.com and Vimeo.com.
Odds are you’ve used at least one of them. Even better are the odds that you’ve heard of the company’s chairman, Barry Diller, who created Fox Broadcasting and USA Broadcasting before building his current ﬁefdom.
Fundamentally, IAC/Interactive is doing ﬁne. It has an excellent history of earnings growth (up 39% last quarter) with expectations for more of the same (25% to 30% growth this year and next).
It pays a respectable dividend of 24 cents per share per quarter, for an annual yield of 1.8%. And cash on hand at the end of the second quarter was $807 million.
One ﬁnal tidbit; Chelsea Clinton joined the board last fall, so you might say management is not only very capable, but it has friends in high places.
Technically, we see a steady uptrend since the start of 2009. The stock slumped in May with the broad market, recovered in July, and broke out to new highs on big volume after the earnings release of July 25.
Since then, the stock has pulled back calmly, establishing a short base at 51, as its 25-day moving average has caught up. We think it’s a good set-up and recommend buying now.
Learn more about this financial newsletter at Timothy Lutts' Cabot Stock of the Month.