3). Baidu and Yandex look to be undervalued by traditional metrics.
Before going any further, though, I want to get back to my question: Which company should you buy? In reality, I’m asking the wrong question. The first one should be: What are you looking for in an investment?
After that, answering which you should buy becomes much easier. So below, I’ve summarized which are good buys for certain investors.
Google Inc (NASDAQ:GOOG)
This is the perfect stock for any investor looking for a safe, familiar stock that has a good chance of appreciating in value over the next decade. Lead by co-founder and visionary Larry Page, Google has its hands in several sticky businesses that win over customers for life outside of search alone: YouTube, Gmail, Chrome, and Android, to name a few.
It should be noted, however, that Google’s stock may not rise in price as much as the other players here. It is far more well entrenched and its home markets more saturated. And if Larry Page leaves any time soon, or if the company starts losing money on mobile searches, then it may be time to reevaluate your investment thesis in Google.
Yahoo! Inc. (NASDAQ:YHOO)
As I stated above, Yahoo! is an interesting case study. Though revenue has fallen, earnings have accelerated over the past couple of years. That’s because the company has been cutting costs and focusing more on its profitable divisions.
While Yahoo! isn’t much of a force anymore in the United States — Bing actually provides search results domestically — it is still a major player overseas. It is among the top 10 most-visited sites in countries like Brazil, Argentina, the Philippines, India, and Pakistan.
With new management in place that investors can finally believe in, the stock is perfect for someone looking for a turnaround investment. That means returns over the next couple of years could be huge… or negative, depending on if management can capitalize on Yahoo!’s international popularity.
Baidu.com, Inc. (ADR) (NASDAQ:BIDU) and Yandex NV (NASDAQ:YNDX)
Finally, we have Baidu and Yandex. If you’re looking for companies with an established presence in their home markets — China and Russia, respectively — with a little more risk involved than Google, these are perfect stocks.
It should be noted that one of the reasons these companies are undervalued is because they are going through the same spending and investment cycle that Google began a couple of years ago. An investment in either company is both an investment in their home countries, a vote of confidence in the truth behind their accounting numbers, and in their respective ability to make mobile profitable.
Given each company’s size, there’s still a lot of room for growth. Baidu is tempting because the population of China is so huge, and the Internet penetration still relatively small. And while Yandex certainly has a smaller base to work with, it is also a top 10 website in four populous former Soviet bloc countries.
So there you have it. Google is great for the safe investor, Yahoo! is prime for someone looking for a turnaround, while Yandex and Baidu are international plays that carry a higher risk/reward proposition.
The article The Best Way to Invest in… the Internet? originally appeared on Fool.com and is written by Brian Stoffel.
Fool contributor Brian Stoffel owns shares of Google, Amazon.com (NASDAQ:AMZN), LinkedIn, and Baidu. The Motley Fool recommends Amazon.com, Baidu, eBay, Facebook, Google, LinkedIn, and Yandex. The Motley Fool owns shares of Amazon.com, Baidu, eBay, Facebook, Google, LinkedIn, and Microsoft.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
