Since joining the bloggingstocks.com team I have not posted specifically about Yahoo! Inc. (NASDAQ:YHOO) and all of a sudden I was wondering why? When I wrote about The BORING FACTOR: new predictor? Yahoo fell in the middle of the pack. General Electric Company (NYSE:GE) and Wal-Mart Stores, Inc. (NYSE:WMT) were deemed the most boring, eBay Inc. (NASDAQ:EBAY) and Google Inc. (NASDAQ:GOOG) the least. The latter two have been the subject of many recent posts. I have written about the housing bubble several times which exposed some passionate feelings in the market place. Maybe Yahoo should have been the most boring. What is going on with them? They are the ones with the Hollywood mogul CEO Terry Semel. They should know about keeping the spotlight on the star! Maybe they don't feel like the star any more?

I remember one of my early communications to one of our editors, Amey Stone, on January 2, 2000. I noted, "I find it very ironic that on the first day of trading in the year 2000, Yahoo has a P/E of 2000... 2000 years times earnings!" Was that a warning sign or what? Of course Internet stocks were going public with reckless abandon, and almost none of them had any earnings, so I guess things were so out of whack that a P/E of 2000 was at least a step in the right direction. At least they had a P/E. How many companies were noted as "NA = Not applicable" under price-to-earnings? Many.

That was a different world, but guess what, its P/E is still ridiculous six years later. Maybe less ridiculous, but way too high just the same. It stands at about 34. The stock price as of this moment is about $27. That is about four dollars above it's twelve month low. The range for Yahoo has gone from $22.65 to $43.66. Much to volatile for my taste and this indicative of a company that is a trading stock not an investment.

Yahoo is one of the top Internet companies in the world. But it is also a media/entertainment company, software company, advertising company, sales outlet, communications company, and much more. I think the price has to come down and that it should merge with an old world company. I have never been convinced that when all is said and done, there will be any Internet company unattached to something in the physical world. I think hard assets outweigh soft assets, no pun intended.

I think Yahoo which has a sizable share of the search business is still searching for itself. If you look at the P/E, the actual fluctuation of the stock price, analyst commentary (much favorable), competition in the marketplace, and the internal squirming around, this seems self evident. If it is going to stand alone as a company I think it should prepare a declaration of independence, stating what they stand for; where they are going; how they intend to get there; and why these factors will sustain growth going forward.

Many of Yahoo's fundamental metrics are strong. ROE, ROIC, ROA, and its gross and net profit margins are all tracking well for now. Does that make it a better time to sell itself or merge? Or does it mean go it alone? I like the idea of a merger, But to what? My favorite candidates are all in China. I think that if they do not make it big in China they will end up competing with a Chinese company instead. And not just in China, but world wide. But that is a another story.

Disclosure: I hold no position in Yahoo, long or short, and never have. I have no position in any of the companies mentioned.

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