Get Interactive with your holdings

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Kevin Kersten 02/10/2014

Are you looking for a good place to eat? Do you have questions you need answered? Do you need to know the meaning of a word? Are you looking for love? All you need to do is logon to Ask.com; it has the answers. Ask competes with Google and is one of the search engines owned by IAC/Interactive ( IACI ), which is a web company that just reported earnings. Whether you need to know the meaning of a word or if you are looking for a special someone, the company has a wide portfolio of websites including ones you probably use every day without even thinking about it.

IACI reported earnings of 1.04 per share beating expectations of $0.91 and last year's $0.70 per share. While earning more, the company's revenues fell from 5.3% from $765.3M one year ago in this quarter to $724.3M. For all of 2013, sales grew 7.6%. Analysts had been expecting a drop in this quarter, but only to $743M, so the shares took a hit when this was reported, dropping about 5%. If you are searching for answers on why the revenue fell, look no further than Google ( GOOG ). Don't Google it, a Google policy change is the answer as the company has been adjusting formulas on advertising behind the scenes in a way that adversely effected IACI results. Online advertising rates and search results play a large role in the many websites this company runs.

IACI owns a portfolio of web properties providing information, services and advertising to consumers. The company owns Ask.com, Match.com, Vimeo, The Daily Beast, Urbanspoon, OKcupid, CityGrid and much more. The company owns or has interest in sites internationally where it has taken successful business models and applied them. As an investor, you probably know of Investopedia, a handy site for definitions, and you might go to dictionary.com to look up words.  While it is true that IACI is not Google or Facebook, it has a large number of sites on nearly any available topic. You will likely find yourself on one of its sites whether you intend to go there directly or not.  In fact, some users may well find the plethora of offerings, like the Ask.com toolbar, which can sometimes be installed automatically with other programs, of lower value and maybe even annoying. But whatever your personal thoughts are on some the sites and services, they do make money.  

People are spending more time and more money on the Web.  U.S. online retail sales have grown about 13% a year since 2010 and analysts expect that growth to continue into 2014. Advertising revenues have also grown across the industry with a 15% gain in 2010, a 22% gain in 2011, and a 15% gain in 2012. When 2013 numbers finally get tallied expectations of 14% growth are expected with 13% growth possible for 2014. While it is true the trend is toward slightly slowing growth, double-digit growth year after year is still phenomenal. Advertisers are committing more of budgets to online areas advertising where they can precisely target consumers and see instant results.


Chart Courtesy of stockcharts.com

Take a look at a covered call on IACI. The stock is trading near $65.04 with the July 65 call going for 5.30. That means one can buy the stock and sell a covered call for a net debit of 59.74 (65.04-5.30). The covered call is active for 164 days (until July 19, 2014) and the trade has an 8.8% assigned return and 8.8% of downside protection. If the stock expires above 65 the trade will bring in a full return and as long as the stock expires above the entry price of 59.74, the trade will make money. Since this is a covered call we don't want to see the stock fall significantly or we could lose money on the trade.

Life is getting more dependent upon the internet every day and owning a piece of the net sounds like a good long-term strategy. IACI has proven that it knows the internet space especially after having spun off Expedia, Lendingtree.com, Home Shopping Network, and Interval.  The company is operating in a dynamic space building websites, providing services and offering information of all sorts. Take a look at investing in IACI. It just might have what you are looking for.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Originally published on InvestorsObserver.com


This article appears in: Investing , Options

Referenced Stocks: IACI , GOOG

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