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James Altucher Focus Your Mind on IAC/InterActiveCorp By James Altucher RealMoney.com Contributor 10/7/2004 10:37 AM EDT URL: http://www.thestreet.com/p/rmoney/jamesaltucher/10186663.html |
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In one of the more bizarre moments for me of 1999, an already strange year for the world financial markets, I found myself face to face in a conference room with psychic Uri Geller, known for decades for bending spoons, fixing watches and melting tanks -- all with the powers of his mind. He had already done the bend-the-spoon thing for me earlier, and now, after clearing everyone out of the conference room, he gave me a two-by-four-inch piece of paper and a thick magic marker and asked me to draw something while he looked the other way. Two loud, squeaky motions of the marker and then a bunch of squiggles later he turned to me and said, "a tree." He was right. Geller was raising money for a Web site he wanted to create -- about getting psychic powers. "In the middle of the front page," he said, "would be a button you push to increase your psychic powers." Which reminded me of the early popular Web site -- pre-Yahoo! (YHOO:Nasdaq) and Google (GOOG:Nasdaq) -- called "The Really Big Button That Doesn't Do Anything." All of this is a long-winded way of saying: Bill Miller, please leave Barry Diller alone. Miller, whose Legg Mason fund owns 13% of IAC/InterActiveCorp (IACI:Nasdaq) , is the famous value investor who has beaten the S&P 500 every year since I was in high school. Now he wants Diller, who admits he doesn't feel like making any acquisitions in this environment, to return to shareholders (via a share repurchase) the $1 billion cash horde he would have after paying down debt. Diller's response is that it's best to leave cash around for any unexpected opportunities. Diller, having made successes out of Fox and then QVC, has now gathered together the most impressive e-commerce conglomerate out there, with brands such as Expedia, hotels.com, match.com, LendingTree and others falling under his umbrella. E-commerce is just in its infancy. According to Jupiter Research, e-commerce growth will continue at a 17% annual rate through 2008, taking us from $65 billion in sales to $117 billion at the end of that period. New buyers plus increases in the amount each buyer spends online will contribute to that growth. E-commerce, as a percentage of total sales, has gone from 1% in 2001 to 1.37% in 2002 to 1.65% in 2003. Although Jupiter is "only" predicting 17% annual growth, the actual growth has been well over 20% and continues to track that way in 2004, according to the U.S. Census Bureau report on e-commerce sales for the second quarter. While IACI is only at a 16 forward price-to-earnings ratio if you back out their cash, this is not a P/E story or a value play. We are still at the beginnings of an immense growth story. Diller, who understands the combination of media and commerce better than any man alive, has demonstrated through continual earnings growth that he's been buying the winners in each category. For example, Match.com has three times as many users as the next most popular network of dating sites. Dating-related Web sites were the most popular online content sites, according to the Online Publisher's Association, ranked by dollars spent by consumers, with 50% year-over-year growth. Similarly, Travel related sites, which IACI dominated through Expedia and Hotels.com as well as content site Citysearch, were among the top gaining categories ranked by unique visitors, according to a recent release by comScore Networks.
