Who's stock would be the better to buy with the Microsoft/Yahoo thing going on?

[SunnyD]

I know it's not a done deal with Microsoft going after the proxy fight for Yahoo, but it got me thinking... Microsoft isn't going away any time soon. IF they win, this could be an interesting thing. So assume one were to jump on the bandwagon here - which would be the better stock to buy in the current scenario? Microsoft's stock price is taking a small hit with this merger, while Yahoo's is going up. Assuming Microsoft does acquire Yahoo, and assuming Microsoft stays strong for years to come, would one be better off buying Microsoft or Yahoo stock today?

 

[DaveSimmons]

Staying in business doesn't mean MS' stock will outperform the S&P500 as a whole, or a good foreign index fund.

I'd vote "none of the above" but I'm an index fund fanboy

 

[hiromizu]

I'd wait. We're likely going to see y2k level market declines in the near future unless a miracle occurs.

 

[Nerva]

i wouldnt buy yahoo because the equity market would have already priced in the merger. assuming the merger destroys value for microsoft in the short term but add value in the long term, you should buy microsoft.

and oh, i don't think this deal will happen, so it's a moot point.

 

[SunnyD]

Originally posted by: 3cho
i wouldnt buy yahoo because the equity market would have already priced in the merger. assuming the merger destroys value for microsoft in the short term but add value in the long term, you should buy microsoft.

and oh, i don't think this deal will happen, so it's a moot point.

Good point - since Yahoo's valuation went from what - $19/share to nearly $30/share once MS made it's initial offer, and MS's share price has generally went down. But again, that's exactly why I asked. I have no idea what normally happens to "buyout" stocks in situations like this. The magnitude of this one was making me wonder.

 

[hiromizu]

Wait until the summer when stocks get hot. Currently stocks are cooling down. I'd say mid/end of March is a good strike point.

 

[EKKC]

yahoo is already overvalued. it is above $28 mainly because of MSFT's offering of $31 per share.
if the deal fails, expect it to fall back to $20 level like it has been before the offer

i would buy microsoft. they went from mid 30s to under 30 because of the deal (the cash they have to pony up for yahoo?), in the long run, regardless of the yahoo deal microsoft would be a good and consistent performer.

 

[Nerva]

Originally posted by: SunnyD

Originally posted by: 3cho
i wouldnt buy yahoo because the equity market would have already priced in the merger. assuming the merger destroys value for microsoft in the short term but add value in the long term, you should buy microsoft.

and oh, i don't think this deal will happen, so it's a moot point.

Good point - since Yahoo's valuation went from what - $19/share to nearly $30/share once MS made it's initial offer, and MS's share price has generally went down. But again, that's exactly why I asked. I have no idea what normally happens to "buyout" stocks in situations like this. The magnitude of this one was making me wonder.

this is not a buy out, it's a merger. and with transactions like this, there is often an opportunity to make money off of the arbitrage. target stock goes up only because the offering price is usually at a premium (change of control). acquiror stock goes down because values are often destroyed in a merger (or perceived to be). so the arb opportunity is long target and short acquiror, but that is extremely difficult to do nowadays.

the deal won't happen though.

 

[imported_Lothar]

Buying Yahoo makes absolutely zero sense and would be the more stupid choice.
Microsoft? Meh...

I'm pretty much bearish on all tech except HPQ.

 

[sniperruff]

CSCO

 

[Auric]

Are you high? Microsoft has been dead money for the better part of a decade. They are too big now to profit from. Heck, they can't even find a decent investment for their own dosh.

 

[CaptainKahuna]

You do realize that it's the same thing. You've said that you have a long term horizon, and that you're assuming MSFT succeeds in acquiring YHOO. In that case, it's the same stock/company.

 

[rockyct]

I think in general that unless you absolutely know what you're doing, it's not really a good idea to invest in individual stocks.

 

[fawhfe]

It really probably depends on your risk tolerance and what you think about the deal. A lot of people are saying Microsoft will offer 35 and the institutional investors will force it on the board. Alternatively, if the deal doesn't go through, it will likely drop back to 20 as people have mentioned. Microsoft isn't going to trade 30% one way or the other in the short-term, so it's a safer bet if you don't want to gamble or you don't think that the deal will go through. Microsoft stock would be one of the better plays in tech given it's current valuation (though I think tech isn't going anywhere short-term). I'd definately disagree that Microsoft is too big to profit from. Sure you aren't going to turn 300% in 6 months, but for example if you had Microsoft for all of 2007, you'd have made something like 15%, which isn't bad, though I'll admit you'd have also given back all those gains in 2008 if you kept holding.

Interestingly, your second question assumes that Microsoft does buy Yahoo and that Microsoft stays strong afterwards. If you have a strong belief that will happen, then you definately want Yahoo stock, because you'll get a big boost when the deal happens, and you will probably also get Microsoft shares as a result of the deal.