WASHINGTON – US stocks more or less reversed their tentative ways from last Friday, starting at Monday morning’s opening bell. The Dow Jones Industrials and the much more broadly based S&P 500 scored impressive gains. But the still-faltering, tech-heavy NASDAQ continued to lag behind as sellers continued to dump overvalued tech issues. But the big story of the day was the confirmation by Verizon (NYSE:VZ) that it decided to sell its boat-anchor investments in Yahoo and AOL. (Via Wall Street Journal, no link, behind paywall.)
Also Read: Confused US investors keep stock analysts and companies guessing
Verizon had acquired both Yahoo and AOL to keep up with rivals AT&T (NYSE:T) and Comcast (NASDAQ:CMCSA) as they bolstered their flagging old-style telecom holdings by bolting on – at great costs – major media company additions.
But Verizon chose its acquisitions poorly. Both Yahoo and AOL, led by a succession of some of the worst CEOs Wall Street has ever seen, had badly damaged their once-dominant internet platforms to become also-rans in this sector. As a result, even after Verizon acquired both companies, it still never managed to acquire the leaders – or the philosophy – that could arguably have turned these two also-rans around.
ZeroHedge has more on the likely Verizon transaction.
(Bold text by ZH.)
“Last week, the first whispers emerged that Verizon was in talks with Apollo [Global Management, Inc.] to dump its media division, which includes the remnants of Yahoo and AOL, for a pricetag of roughly $5 billion – a tiny fraction of the $300 billion combined valuation for AOL and Yahoo during their prime 20 years ago, as Bloomberg’s Tara Lachapelle pointed out in a tweet.
“After reports piled up over the weekend, Bloomberg and others have has confirmed Monday that a deal had been struck. Reports put the pricetag at $5 billion, then high end of the $4 billion to $5 billion range reported over the weekend…
“No final decision has been made and discussions could fall through. The assets could fetch as much as $5 billion, Bloomberg News has reported…
“Furthermore, Verizon will maintain its minority stake in the new entity, which will be known as Yahoo….
“Verizon already dumped the Huffington Post to Buzzfeed (which proceeded to fire 1/3rd of the site’s staff after it failed to hit certain traffic benchmarks) last year, and it has been reportedly searching for a buyer for the rest of its ill-fated media assets for some time. Whatever proceeds it manages to raise from the sale will likely be immediately invested in buying more 5G wireless spectrum as it competes with rival AT&T to dominate the new generation of wireless.”
Wrapping up today’s Verizon news
(An aside: Verizon is lucky to be rid of the decaying and always dicey Huffpo property. Meanwhile, the fake journalists over at Buzzfeed deserve having to deal with what’s left of that hot mess.)
Ultimately, the jury remains out as to whether any of these cable / telco giants can easily incorporate any remaining media / social media entities into their still valuable but definitely old-style telecom management styles. Verizon shares got a slight boost Monday, indicating investors were OK with the company’s apparent move. But with only a 0.22% gain on the day, Verizon investors apparently remained mostly unimpressed. The company will allegedly use the Yahoo / AOL sales proceeds to boost its 5G improvements. We’ll just have to see how that works.
Other investment ideas the bulls still appear to like
Elsewhere on Wall Street, a broad basket of stocks, many of them large-cap, got back to their winning ways Monday. With regard to our own portfolios, Apple (NASDAQ:AAPL) got back to its winning ways again today, gaining nearly a percentage point. On the other hand, for now at least, Microsoft (NASDAQ:MSFT) continues to flounder. It was off a fraction Monday, closing at $251.86.
Valero Energy (NYSE:VLO), one of our best performers, also returned to the winners’ circle Monday, booking a 5.67% gain. Interestingly, our energy holdings, which we largely acquired last fall when everyone hated them, have continued to outperform, even under a hostile Washington administration. Oddly, they’ve likely been helped for the Biden Junta’s return to the Obama administration’s fossil fuel hating ways. That’s goosed the profits and price of oil and gas holdings largely due to shrinking supplies.
We’re up nearly 100% in VLO shares, since we started acquiring them last October. We also have gains in widely hated Exxon-Mobil (NYSE:XOM) shares that we acquired in December 2020 (up 40%) as well. But our biggest gains, percentage-wise, have come via our small holding of lesser-known EOG Resources, Inc. (NYSE:EOG). Buying into these shares in October of 2020 has given our portfolio a whopping 115% price improvement since then. Damn, we wished we’d have bought a lot more. But you take what you can get. We liked this stock when it was a bargain. But its performance to date exceeds even the most optimistic original estimates.
The (apparent) virtues of contrarianism
We’ve found over the years that a contrarian approach to investing often provides the best rewards. Although, if you take contrarianism too far you can get hosed. Or, if you remain optimistic for too long, even after the prices of your contrarian shares begin to tank, you can watch your fat gains evaporate into thin air almost overnight.
In other words, while we’re enjoying our paper profits in the still-hated energy sector, we’re considering when we should sell. Wonderful things never go on forever.
Actually, in many respects, everything investors hold today seems to be on the highway to heaven. Given that we’re now officially at the beginning of “sell in May and go away” time, we wonder just what kind of IED is buried somewhere underneath this apparently never-quit bull market. We’d hate to find out after the fact.
Stay safe and keep an eye on your investments.
