Stockpickr: Picking at Domain-Name Stocks

I asked him if he had received any offers for any of the domain names he owns. "Yes," he said, "but they were not bought with the intent to sell for a profit. I wanted to use them. Several telco service operators have offered me over $3 million for calls.com so they could compete against Skype. But I am holding out for a much higher price, given my view that all calls are going to be made over the Internet in the next 10 years, and calls.com is the hotels.com of that space."

Bob owns, among other names, sherry.com, helmet.com, hedgefunds.com and takeovers.com.

The Business of Domain Names

The Domain Name Index on Stockpickr has three large-cap companies with good domain name portfolios and businesses, and three small-cap companies with many domain names among their assets. Here's a look at the large-caps.

The granddaddy of the domain name business is VeriSign(VRSN Quote), which provides all the .com and .net domain names out there. The registrars are simply reselling the domain names they acquire through VeriSign. If you go to register.com, for instance, and buy a domain name for $30 a year, you're actually paying VeriSign $6 a year at the base of that transaction.

VeriSign has a clean balance sheet with $500 million in net cash and trades for just a little over 10 times cash flows, or enterprise value over EBITDA (earnings before interest, taxes, depreciation and amortization).