Last Autumn it was obvious that Yahoo stock was seriously undervalued by comparison to Google, Amazon, and other major internet companies.
However, not only did I not have an investment portfolio, but the promise of the stock markets tanking made it a bad time to set up a portfolio in the first place.
Once the storm was over, I planned to then start some form of investment portfolio, probably tied to a SIPP for retirement within my business, and focus about 50% in YHOO stock.
Now that Microsoft has placed a formal offer of purchase on Yahoo, you can expect YHOO shares to rise through the year - possibly into the $40-$50 bracket.
If true, that would be an amazing investment after YHOO shares hit $19 last week.
Over the past year, I’ve been increasingly learning about the stock market:
1. It’s a herd mentality - it acts like a herd, it moves like a herd - to be successful, you either make decisions on where the herd is could move (long term) or else move with the herd (short term)
2. Stock falls are a great bargain hunting opportunity
3. Threats of potential stock falls means invest in gold - the herd won’t buy until the last minute
4. Diversification is always key
5. Make strategic decisions on a sound basis, then stick to it. Change your mind too frequently and you’ll get caught out, ie, investing on where the herd will move, getting frustrated because the herd hasn’t moved there yet and selling up to join the herd, only for the herd to then move where you expected, wiping out the gains on your original decision.
However, for all this stock talk, and how much I’ve always loved the idea of playing the stock markets, a comment made in my business forums always struck out:
“Your best investment opportunity is your own business”.
In other words, investment in your own business should always outshine stock market investments.
My planned strategy?
Continue to invest in my business, but divert some of the revenues into a share builder or similar program tied to SIPPs for a retirement fund.
That way, I can continue to grow my business, while at the same time, keeping back a nest egg for when I need it.
In the meantime, it’ll be interesting to see how the Microsoft offer goes down - I’m not expecting it to be a smooth ride, and Yahoo may yet reject the offer (as apparently they did last year).
If Yahoo do accept, if would take years for Microsoft to integrate Yahoo services into its own. Investors will know this and tank Microsoft stock in the short-term because they see MS as software vendor, not advertiser - or, at the very least, Microsoft stock will remain undervalued until the fruits come into play in the long term advertising race.
If Yahoo rejects the offer, then Yahoo still has time for its stock to rise - although the short-term advertising outlook is one of decline, the long term outlook is explosive, and Yahoo still have the potential to grab a big chunk of marketshare here.
Either way, I’ll still be watching YHOO stock, and if MS buy the company, I’ll be watching MS stock next. :)
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