Mark Pincus Blog

Taking my lumps on YHOO

i'm now down 2.5% on my yahoo trades. i bought more last week on the dip at 25.40 and it's down a bit more from there. sounds like yahoo is preparing the street for some more bad news around its search business. i dont really believe their comments about weakness on the display ad front given my understanding that they have raised prices 30% this year and are sold out. i've never tried to win on market timing or even getting a company's fundamentals right. i'm a macro investor. from a 3 year perspective i believe yahoo is cheap at a $34 billion market cap.

Buy amazon and short ebay

from a macro perspective it seems clear that amazon should one day be worth more than ebay. here's my reasoning...

i can see how i will still be doing my ecommerce on amazon in five years as they are the walmart of online retailing. they're the fastest place for me to buy my gifts for father's day, new babies, i even go to them to buy pro flowers for mother's day. it's just more conventient and always seems like a good deal.

ebay is in a tougher spot. as the broker of person to person ecommerce transactions, they are always at risk of buyers and sellers finding each other through other means, like google. i dont see google replacing amazon. i guess they could. google could let you input a credit card. they could 'host' the transaction like amazon and then get your ratings like ebay and amzn.

well, my take is that ebay's market cap of 45 billion has to go down while amazon's has no reason to drop. on a quick look, it appears that amzn is trading at 32x the high estimate of 2007 earnings with 50% expected growth, while ebay trades for 29x with 30% forecasted growth. i recommended shorting ebay on this blog in the fall when it was around $40 per share. it went up a bit before settling down to $32 now.

i need to understand amzn's story a bit better but the idea of a paired trade here is interesting to me. and with the share prices almost the same it makes the math easy too:)

anyone have any deeper insights into these stocks?

Shorted Ebay today

putting my money where my blog mouth is, i shorted 5000 shares of ebay at $39 today. as i've said, i think ebay is a great company run by really smart people, however, i believe they have some tough times ahead as their walled garden marketplace confronts competition from the free and open network. as many have also said, their purchase of skype which is hard to justify on any synergistic level seems like a big sell sign. looks like backwards arbitrage as they are useing their stock at say a 40 p/e and buying another stock at say a 300 p/e.

Are you financially 'safe'?

this is a question that struck me for some reason on my drive home today. i wondered, what if there were a total financial meltdown? how would i fare? my answer was not too well. all my money is in financial instruments from hedge funds to direct equities and the remainder in real estate. if there were a total meltdown, akin to a run on the banks for all markets in general, then stocks might collapse, illiquid assets like real estate would immediately lose their market, especially becuase mortgage loans based on perceived market values would evaporate.

i started to wonder, what would be safe and shouldnt i have some money in whatever that is? but what would be safe? maybe commodities. well i kind of have some funds there. currency? who leaves money  in that? and what if the dollar got crushed in the process? seems unlikely given that in times of worldwide uncertainty there is a flight to relatively safe assets. i've heard people say gold in the past but not totally sure i understand what drives and maintains gold over time. seems like owning a bunch of barrells of oil is where i'd want to be but how do you do that?

anyway, this seems like a good time to ask ourselves whether we're safe while many of us sit on real estate that seems highly over valued and continue to pump our money into the markets chasing better returns.

Sold two favorite stocks

i sold two stocks today, realizing i was holding both for emotional reasons.

first, i sold my remaining shares in berkshire hathaway. now, this is probably a signal that you should buy. for me, it has been fun to have warren buffett as my own money manager. however, his shares havent performed well (i was up 11% in 2.5 years) and i'm afraid that it is getting too hard to manage such a massive empire.

second, i sold my remaining shares in etrade. this was my first purchase in late 2002 when i started becoming a believer again in the consumer internet. it has performed amazingly well going from $4 to $17.50 and there's some old rule about not selling your winners and keeping your losers. however, i bought it because it was severely undervalued relative to its then prospects (was projecting $1.00 per share in eps), whereas today it's more fully valued.

i love investing, especially in public securities where you get an immediate score card of how you're doing. my reality is that i will always be a macro investor, meaning i invest in big picture themes rather than based on detailed fundamental analysis. my big macros now are energy (like the rest of the world) and early stage consumer web which still seems to be fairly under invested given the large prospects. i know these seem like two very different areas but i was encouraged to read that the founder and ceo of IDT (who has made a number of brilliant bets) is actually going the same route, though his also includes film and media which i've viewed as more of a hobby than real business.

Two New Investments

EVDB - the service, which is aimed at providing a more open way for people to find and publish all events, was launched at pc forum last month and recently backed by draper fisher. i think that evdb represents the right approach to a web service in that they aggregate all existing events from meetup (and hopefully tribe). then they enable people to tag them into whatever categories they want as well as publish their own. i particularly like the integration with ical which seems way underleveraged to date as an exciting way for groups to share calendars. i really dont get why evite hasnt turned themselves into a branded web service that could be found within friendster, myspace and tribe but that's another diatribe.

Merlin Securities - this new prime brokerage service was launched by my good friend aaron vermut with his dad, steve vermut. dad built bank of america's prime broker into a business that i understand was more profitable than starbucks. in addition to having great web interfaces and software, merlin represents a great opportunity to bet on the explosion of hedge funds, but more selling picks and shovels than digging.