Street Speculator

YAHOO (Symbol:YHOO) has been the Wall Street whipping boy for the past year. Sure Google (Symbol:GOOG) has taken their luster in internet search and popularity (The word “Yahoo” is not yet a verb). But, in the mid to late 90’s Yahoo was the new “cool”.

When the Internet started to gain global popularity, even to the point where it became a “necessity”, I would use Yahoo exclusively to conduct web searches. Now I use Google. That is not a knock against Yahoo but rather a compliment to Google. However when looking for financial news, Yahoo! Finance is my EXCLUSIVE provider.

The SPECs create this report on Yahoo to bring investors back to reality. Sure they are being pursued by Big Brother Microsoft (Symbol:MSFT). Wall Street analysts thinks this merger would be good for Microsoft as Yahoo does not seem to show any significant growth potential in the future. In other words, they are calling Yahoo! a DINOSAUR.

Ignore this and BUY YAHOO!!! The closing price today was $12.10/share. This price is a great opportunity was small investors (Those with $500 + in liquid cash). They recently reported 3rd quarter earnings of $54.3 million. This is down from 3rd quarter ‘07 of $151 million. But, Yahoo! has U.S. $3.2 billion in cash, NO DEBT!! and they are somewhat feeling the economic crisis with everyone else.

We highlight the “U.S.” because of Yahoo’s use of an accounting procedure (Other 500 co.’s use the same procedure) when calculating its international revenue, REPATRIATION. Repatriation is the process of converting foreign currency into the currency of one’s own country (Investopedia). In layman’s terms, what Yahoo! does is 1st set-up foreign country subsidiaries. These entities control revenue generated by Yahoo! outside of the United States. This international revenue is free of U.S. taxation as long as it never enters the U.S.  Ex: All revenue generated from Yahoo! Japan and Yahoo! Canada are more than likely held in the banks located outside of the United States. Yahoo! (the one you and I know and hear about daily) however remains the parent company.

So, as long as Yahoo! does not bring this earned revenue into the U.S., they pay no corporate taxes on this money. This money can be used to invest in its other international subsidiaries, issue dividends, and invest in other securities.

Yahoo’s 2007 annual report states that it had over $1billion held by its foreign subsidiaries. Yahoo’s international revenue constitute about 40% of its total. That amount is likely to increase as emerging market countries continuously develop internet infrastructure which will bring more of its citizens online and further enhance revenue for Yahoo! and other internet companies.

Ignore the analysts and put this stock on your “buy” list. They will never need a government bailout nor an economic stimulus. Yahoo! has one of the most sound financial books of all publicly traded companies. They escaped the so-called “Internet Bubble” and operate a few of the top 5 internet destinations (Yahoo! Finance, and Yahoo! Sports).

Look at this feature of their initial entry into Interactive Entertainment:

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