Yahoo! Inc. (NASDAQ:YHOO) posted higher than expected earnings for the fourth quarter. Reports were released Monday evening, and by mid-day on Wednesday the stock price had grown roughly 1.5%. Since Marissa Mayer became the CEO of Yahoo! the stock has soared approximately 35%. She has brought life back to the company after a few years of dormant behavior. The balance sheet for Yahoo! looks good, but as with some other companies, investors want to know what the company will do with its extra cash.
It is good to see Yahoo! starting to head in the right direction, but there are still some major concerns. With single digit growth in sales, their competitors (like Google Inc (NASDAQ:GOOG) and eBay Inc (NASDAQ:EBAY) ) are posting revenue growths around 20%. As Warren Buffett always talks about, find a company with a durable competitive advantage. This is more difficult to do with Yahoo! than some others. Successful tech companies have moved into a “mobile” mindset, and Yahoo! doesn’t have much in that area. They don’t have their own browser, tablets, operating systems, smart phones, or hardware.
Marissa Mayer seems to understand this, and seems focused on growing what compatibilities they do have in the mobile world. Yahoo! seems to be improving in the app world. Although other companies seem to be far ahead in the mobile world, Marissa has done a remarkable job so far as the company’s CEO. With that said, her honeymoon period is over. For the success that she and the company have enjoyed, it only seems to get harder from here. Marissa does deserve a little bit longer to get this company turned around – after all, her job is to maneuver the battleship out from the mud. Yahoo! shows potential, but should be a diversified investment.
Harley-Davidson, Inc. (NYSE:HOG) had mixed results in their report. They showed higher sales of motorcycles in the United States and abroad, yet their profits and revenues decreased. It was interesting to see that their unit sales were up. The company has been spending a lot of energy and time on restructuring the business and making some investments, and investors should benefit from this. Harley-Davidson, Inc. (NYSE:HOG) expects around $320 million of cost savings each year for the next few years. This should lead to higher profits down the road.
Harley Davidson’s stock has had quite a run, as it recently hit a five year high. Nearly all of Harley Davidson’s competitors are private, which most investors view as a negative. The problem with this is that many private companies are not necessarily concerned with profit. They can cut prices and make less to compete with publicly traded companies without concern for any shareholders. Harley Davidson is a strong brand, a well run company, and has out-performed the S&P 500 by 15% in the past six months. Because of the success the company has had, it is priced very richly. The FCF yield for the stock is 4.7%, actually cheaper than I would have anticipated.
