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It's been easy to forget about
Yahoo!'s(YHOO - Get Report) attractive attributes over the last few years. In spite of the public screw-ups this firm has engaged in, Yahoo! remains one of the most popular destinations on the Internet, and it still owns a successful collection of web services. Yahoo! is loaded too. After selling off a chunk of its Alibaba ownership, the firm carries $4.2 billion in cash and another $5.5 billion in long-term investments. For those keeping track, that cash and investment position makes up close to 40% of YHOO's market capitalization.
In other words, the stakes are a whole lot lower than they appear for Yahoo!'s new management team -- if it can avoid screwing up and spending all of that cash. While too many investors worry about whether or not Yahoo! can turn around its business, they should really be worried about whether Yahoo can maintain its huge traffic stats and carve out a more identifiable niche for itself. Getting rid of superfluous business units is a good start -- cutting costs only serves to magnify the operating metrics that YHOO already offers investors.
If Yahoo! can manage to keep acquisitions small and work out a niche visitor, it could surprise investors in the near-term. In the meantime, management needs to start turning that huge warchest into shareholder yield through buybacks and a dividend payout.
To see all of this week's Rocket Stocks in action, check out
the Rocket Stocks portfolio at Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.