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"Don't Buy Yahoo! -- Today, That Is"

By James J. Cramer
RealMoney.com Columnist
10/12/2004 8:56 AM EDT


"Don't buy Yahoo!

There. I put it as simply as possible. Because as much as I love Yahoo! -- and I do -- I can't think of a reason in the world for the company to try to sell itself to you today. I also can't think of a reason in the world for the hedge fund community, which is so adept at spinning the results, to put a sheen on the numbers. When you have the combination of a stock that has run 9 points, a management team as cautious and nonpromotional as this one and a hedge fund community that needs stocks lower to beat their benchmarks, it seems lethal to the short-term prospects for Yahoo!.

Aha -- the key term there, the operative term, is "short-term." Because in the long-term, I can't think of a stock that has more possibilities to beat numbers and grow faster than any other company in the universe.

Terry Semel took over the company and put in a simplified business model that said, "Get the customer and keep the customer here, yet entice advertisers and content providers to get brand recognition rather than clickbacks." That's a recipe for organic growth with low overhead.

In fact, I think Yahoo! is in the position of the cable companies, except that unlike the cable companies, Yahoo! pays nothing for content. Can you think of a better model than that? Advertising's a plus. Eyeballs are a plus. And now mass subscriptions for things like horoscopes and fantasy leagues are a huge plus.

Next? The destruction of the travel-on-the-Web model as we know it, keeping those customers on Yahoo!, too. In fact, if it weren't for Google (GOOG:Nasdaq - commentary - research), I would tell you that Yahoo! is ABC, NBC, CBS and Fox all rolled up into one great media company with no raw costs other than salaries, which can be taken in stock because the stock's still going up.

So, why "Don't buy Yahoo?" Because I am conditioned to writing positives about stocks here that I like, such as GERQY, Google, eBay (EBAY:Nasdaq - commentary - research), Research In Motion (RIMM:Nasdaq - commentary - research), Qualcomm (QCOM:Nasdaq - commentary - research) and Yahoo!. But I then find that some hedge fund joker or two has pushed the stock down after it reports, and all the men who live to shoot Liberty Valance are all over me about what a knucklehead I am, when I am clearly talking about the need to own Yahoo! for the long-term.

This way, I have all bases covered. The people who react with rage when the stock goes to $32 today should, instead, react with glee. Because tomorrow the story will be, "Buy Yahoo!."

At the time of publication, Cramer was long Yahoo!. "

(in www.realmoney.com)