IAC Works On Bullish Pattern But Needs Better Market


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The uptrend that began in July didn't deliver many big winners.

Few breakouts gained 20% or more.

A weak uptrend has one benefit. When it ends and a market correction begins, many stocks form base-on-base patterns. This can be good.

As IBD founder and Chairman William J. O'Neil wrote in "How To Make Money In Stocks," when a correction ends and a strong market uptrend begins, the base on base "is apt to be one of the first to emerge."

IAC InterActiveCorp ( IACI ) broke out of a cup without handle in July, but the breakout didn't work. Now the stock is forming a base-on-base pattern. The pattern is stage one, according to MarketSmith's pattern-recognition technology.

A first- or second-stage breakout is more likely to work than those from later stages.

The current pattern shows bullishly tighter action than the previous consolidation. However, since it's not known how long the market correction will last, this pattern could look different by the time a new uptrend is confirmed.

IAC holds more than 150 brands and Internet sites, including Match.com and Ask.com. It also has a controlling stake in the Newsweek Daily Beast Company, which IAC says eventually will cease printing magazines and become an online-only outfit.

About half of IAC's revenue is tied to a listing deal with Google ( GOOG ).

The company paid its first dividend in December. The 12-cent-a-share dividend was doubled, as of the September payout. The annualized yield is 1.8%.

Annual earnings increased 41% in 2010 and 172% last year as revenue grew 22% and 26%. The Street expects a 25% pop this year on a 33% revenue gain.

Q3 results will be reported Oct. 24 before the market's open. Analysts expect a 20% increase in EPS and 34% rise in sales.

Drawbacks include last year's return on equity of 11%. While this was the best in at least nine years, the ratio is below the 17% or greater level associated with elite stocks.

The number of funds holding shares rose this year through September from 563 to 599. But funds' overall stake fell about 4%.

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

This article appears in: Personal Finance , Investing Ideas
More Headlines for: GOOG , IACI

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