Since the beginning of the year, shares of Yahoo!, Inc. (NASDAQ:YHOO) have lost 30% as the stock has severely underperformed the broad market. To put this in perspective, shares of Google, Inc. (NASDAQ:GOOG) have gained nearly 18% over the same period.
Now we find that institutions may be in the process of giving up on the stock as Fidelity Investments dumped 16 million shares [subscription required] in recent weeks. It is also noted that Fidelity is not the only institutional shareholder to bail out of the stock this year. It would stand to reason that Fidelity's selling has helped to pressure the stock, but as a contrarian, my ears perk up when I hear chatter about signs of heavy selling.
A rush to the exits can be a sign of capitulation, a situation where selling pressure is flushed out of the system. Once the selling has run its course, you have the potential for buying demand once again to assert itself and boost the shares.
Digging a little deeper into Yahoo!, however, shows that the stock may not yet be at the point where everyone has capitulated. According to Zacks, 14 of 23 analysts (61%) still rank the stock a "buy." I say "still" because the percentage of "buys" stood at 78% in January, when the stock was trading near multi-year highs.
Nick Perry is an analyst with Schaeffer's Investment Research.
Fidelity dumps Yahoo shares -- signaling a bottom?
Posted Nov 15th 2006 2:14PM by Nick Perry
Filed under: SEC filings, Google (GOOG), Yahoo! (YHOO)
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