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Is Apple’s Big Tax Hit Really a Big Deal?

August 30, 2016, 3:12 pm

Apple (AAPL) made headlines today after the European Commission ruled that Ireland granted it illegal tax breaks in order to lure its business to Dublin. While the stock dipped on the news, I’m not too concerned here and expect it to rebound fairly quickly as the news cycle shifts to the back-to-school iPhone 7 launch and the holidays beyond.

Although Ireland now needs to claw back approximately $14.5 billion in uncollected tax, neither the national authorities nor AAPL are rushing the process. Working through the appeal system will take years, during which time the company will simply keep the cash in escrow drawing interest.

In addition, the ruling reveals the limit of what the European regulators say AAPL owes in tax and penalties for 2003-2013. Even a failed appeal is unlikely to increase that liability; the only direction the number can go from here is down.

And lastly, every dollar of tax AAPL pays on that cash will earn it an IRS credit when and if it finally repatriates it where it can return to U.S. shareholders. Up until today the company had treated its Irish earnings as subject to full U.S. tax because its debt to Dublin never rose above 1% of annual profit. Since foreign corporate taxes are subtracted from the effective U.S. rate a company pays, AAPL was looking at paying to the IRS up to 34.5% to move that money back home.

Assuming that the $14.5 billion brings AAPL’s total Irish tax bill close to compliance with the posted 25% corporate rate, it now needs to pay at most an additional 10% toll on every dollar it sends back. The overall impact on the balance sheet doesn’t really change—as CEO Tim Cook has pointed out—but with up to 70% of the benefit of keeping the money in place evaporating, the operational math changes.

In effect, the European Commission just accelerated the strategic choice of whether to get all or most of that money moving again. The 1% loophole has closed. AAPL and other companies exploited it to the best of their ability, even though it left the bulk of their liquid assets stranded overseas for years in order to defer the inevitable IRS bill. Paradoxically, the IRS will not get a much smaller cut of that money once Dublin takes it regulator-mandated fair share. But that’s not AAPL’s problem.

That money won’t move before the appeals process is over. By that point, of course, we’ll have a new occupant in the White House. Ironically, Donald Trump’s current plan doesn’t give AAPL anything because the company is probably looking at a 10% net IRS bill either way. There’s no additional incentive there and depending on the accounting wizardry Tim Cook can whip up, Trump may actually make repatriating the assets look less attractive. Likewise, under Hillary Clinton’s proposals, the incentives for AAPL don’t really change one way or the other—the only new policy card on the table is that it would be harder for the company to permanently migrate its headquarters offshore some day.

My point here is that despite the ruling this looks like business as usual for AAPL. The biggest near-term impacts revolve around sentiment and flexibility: both are mildly positive. On the one hand, the long overhand of the European Commission moves closer to resolution, so investors no longer need to worry about nebulous risk factors on the wind. And that knowledge brings management incrementally closer to the moment where they can justify liberating their offshore cash to engage in transformative research and development (R&D), mergers and acquisitions (M&A) or simple shareholder rewards programs.

Ultimately, I think this will be a watershed moment for AAPL. The decade when this company could rest on massive cushions of cash instead of relying on its tradition of innovation is winding down fast.

And as AAPL goes, the rest of the U.S. corporate landscape follows. Alphabet (GOOGL) and Facebook (FB) have big offices in Ireland as part of their global tax management activities. Companies like Amazon (AMZN) and McDonald’s (MCD) have similar arrangements with Luxembourg. Clarifying their tax status may create short-term liabilities like what we’re seeing with AAPL today, but it’ll also force them to get that money working.

We’re talking apparently $2 trillion in U.S. capital stranded overseas waiting to get back to work when it becomes clear that the tax situation isn’t going to get any better. When that happens, they’ll take the IRS hit and start investing. For an economy that’s been starving for corporate investment, that’s a good thing.  

Pfizer (PFE): Leading the Biotech Buyouts

August 26, 2016, 2:15 pm

News broke this week that Pfizer (PFE) has acquired Medivation (MDVN) for $14 billion—but before Wall Street was even able to digest the deal, the company announced that it will also purchase a part of AstraZeneca’s  antibiotics business.

PFE has earned itself a reputation as a “serial acquirer.” Some investors complain that the company is overpaying for its mergers and acquisitions (M&A) deals … but is it actually working?

PFE generally pays out about half of its profit immediately as dividends. That’s generally $1-$1.20 a per share each year, with the other half—about $4.5 billion—going toward keeping the pipeline fresh. In order to keep that pipeline humming without digging too much into the company’s funds, the deals have to come throughout the market cycle.

Management always wants to acquire for as cheap as possible, but sometimes market conditions mandate that they’ll have to pay a higher price than they would ideally want. PFE paid about 15X current revenue for MDVN because the company actually has a profitable franchise to work with. And in a world where the average biotech stock is trading at 21X book value (remember, two-thirds of these companies are pre-revenue), better deals aren’t easy to find.

But when the cycle turns again, PFE will have a shot at more attractive moves. The company might decide to sit for a few years while smaller businesses take on the risk of building new MDVN-size franchises. Once those businesses start running out of cash (price controls make that happen faster), the food chain will start consolidating on the speculative side and PFE could continue to bolt on other drug companies onto its chassis.

With Hillary Clinton putting pressure on biotech stocks, we could see the cycle turn around quicker than usual. At this point, Wall Street knows that Clinton can talk the drug sector down with just one terse tweet of controlled outrage. We saw it last year during the Martin Shkreli fiasco and got a reminder on Wednesday when the sector plummeted after Clinton entered the conversation on the EpiPen price hike.

On the bright side, any long-term pressure we see on drug prices due to the election results is a long-term win for Big Pharma because it creates motivated sellers. That opens windows of opportunity for savvy buyers.

As it is, PFE has delivered a 10% return on equity over the last year, which is about average for the industry. It’s been a hard year for consolidators given the slightly inflated prices, but it opens up room for better comparisons when the real feeding frenzy starts. When that happens, PFE looks like it could be an exciting buy. For now, business as usual is good enough.

Protecting Your Portfolio

August 24, 2016, 2:37 pm

With so much uncertainty in the market right now, it can be hard to make sense of it all. Between the Federal Reserve, the ongoing Presidential election campaigns and global macroeconomic concerns, many factors are competing to guide the direction of the market, which makes it tough to know what headline Wall Street is going to run with next. That’s a lot to digest, so I’m getting in touch today to share some smart ways to protect your portfolio through it all.

While I continue to believe the Federal Reserve won’t raise interest rates until at least December (we’ll likely find out more when Chair Janet Yellen speaks at Jackson Hole on Friday), there’s no question that a rate hike is inevitable over time. When it does occur, we could see a brief relief rally followed by a period of consolidation as the market reflects on the Fed’s next move, how many rates hikes there may be and the bond market’s response. If investors decide the Fed’s action is likely finished, the reaction could be very minor.

Given near-term riskiness in the market, I believe a larger-than-normal cash position is important. Typically you want to have enough cash available to meet expenses over the next six months, with another 10% available to take advantage of near-term sell-offs in individual stocks or the entire market. Right now, I think a 30% cash position is good but recommend that you take your own risk tolerance into account when determining what’s best for your portfolio.

And when it comes to the general setup of your portfolio, diversifying in value stocks is certainly a good idea right now. Value should continue to outperform growth, especially if we end up seeing a period of sustained rate increases given that some of the current lofty multiples in growth are dependent on low interest rates. In the end, value should always account for at least a portion of your overall portfolio, especially if you’re a more conservative investor trying to minimize the market’s inevitable ups and downs.

There are a lot of value stocks out there, so when sifting through the pile I recommend looking at one of the most important metrics right now: PE. I like to see stocks trading below a market multiple of forward earnings, which in this case is 16.5, although that could be raised a bit for certain stocks and industry groups. I also like to look at free cash flow, dividend yields, earnings trends and return on capital.

I also recommend stressing more high-quality names, as well as those with strong balance sheets that should be able to ride out the market’s tough patches and come out in good shape. But the most important thing is to always make sure the valuation makes sense. If you are able to do these things successfully with a little patience and caution, you should see favorable results over the next 12 months.

Mars vs. Venus: Does Gender Impact ETF Trading?

August 19, 2016, 2:54 pm

For as long as I have worked on Wall Street, there’s been a debate raging over male and female investment styles and which one comes out on top. Now that Matt McCall and I have teamed up for an exciting new ETF trading service called ETF Trend Trader, we thought it would be fun to look at the differences between men and women when it comes to investing and how it plays a role with ETFs.

Years of studies have shown that gender plays a significant role in market psychology, with men typically chasing momentum while women hang back for more reliable performance. While neither Matt nor I really buy into this biological determinism – after all, Warren Buffett comes to mind as a great “feminine” investor! – both of these mentalities can be extremely useful.

What’s considered the “male” market mindset revolves around the adrenaline rush of speed. Trades come to the table fast and furious. When they pay out, the gratification is immediate and the profit rolls into the next name on the screen. There isn’t a lot of patience for positions that don’t surge right away, so it’s really all about getting into a run early and riding high enough to cover the commissions.

On the flip side, studies show that female investors will sacrifice a little upside for reliability. This style starts with intuitions similar to the ones that drive the male trader, but here there’s no rush to push the buy button. Sometimes weeks or even months can pass before all the hints finally add up to conviction and the order executes. Once it does, profit-taking is usually disciplined, sometimes cutting a winning trade too short but always aiming to protect money when you’ve made it.

This is another area where ETFs really do offer the best of both worlds since they cross the strengths of both of these investment styles while neutralizing many of the weaknesses.

For feminine-minded investors, the challenge is overcoming timidity and getting off the sidelines – too often, too much of the portfolio remains shelved in cash or dead money positions. The ETF format provides a framework for thinking about quicker turnaround and more opportunistic entries and exits. Unlike stolid mutual funds that price after hours, an ETF can move throughout the trading day, enhancing returns and narrowing holding periods for those who stay alert to fleeting opportunities.

Of course, only the most concentrated ETFs will move as fast as thinly-traded stocks, so you’re not diving straight into the deep end of the pool. But even so, the fact that we’re diversifying through different trends opens up opportunities to reach for bigger and bigger returns. Beating the market is a beautiful thing because it builds confidence as well as your bank account.

There are a lot of advantages to quicker trades over buy-and-hold ETFs, so there is still that thrill of capturing the latest trend for those who take a more traditionally male approach. Aggressive investors can intuitively grasp the “exchange-traded” dimension of the ETF structure, but here it’s a matter of moving close to an efficient frontier without sacrificing a lot of speed. ETFs can only move as fast as their most overweighted holdings, so there’s a ceiling on the volatility you’ll have to swallow even on the epic days. When the moves are on your side, you’ll still make money. When they go against you, the slight lag generally shields you from taking big hits.

For Matt and I, the crossover of these two investment styles statistically generates richer performance and ultimately better investment outcomes. You get a bit of a thrill of individual stocks, some of the cushion of mutual funds and all of the upside of picking winners. So whether your market style is from Mars or Venus, our down-to-Earth approach to ETF trading maximizes your profit potential.

Now is a critical time to jump into the ETF market, so if you’re interested in joining us as we rake in market-beating profits, please check out ETF Trend Trader!

TSLA’s Worst Enemy: Elon Musk’s Own Ambition

August 16, 2016, 3:53 pm

One of the biggest draws for Tesla (TSLA) is management’s commitment to the lofty goals they set for the company. No one can say CEO Elon Musk isn’t ambitious, and it can be a powerful trait to have when you’re running a relatively young business. But that same drive to reach for the stars can be a double-edged sword. As Musk is hopefully beginning to realize, expectations carry a lot of weight in the world of stocks and investing.

TSLA has had a rollercoaster of a year so far. After plunging in February along with the rest of the market, shares spiked in April to levels not seen since last summer. The stock then sunk again in May after management announced plans for a secondary offering, and has traded more or less sideways ever since. Most investors seem to be at a loss of how to act when it comes to TSLA due to its inherent risk: management makes a lot of bold projections that drive hype and positive momentum, but when those expectations aren’t met, it all comes crashing back down to Earth again.

Most recently, Musk claimed that the company expected to deliver about 17,000 vehicles to buyers in the second quarter, its largest shipment forecast ever. TSLA ended up 15% short, delivering just 14,370 vehicles. And it’s far from the first time the company has missed its own projections. In fact, the Wall Street Journal reported that TSLA has fallen short of over 20 forecasts made by Musk in the past five years, unable to match some financial and car-production output targets until a year after the expected dates.

Musk has stated in interviews that he doesn’t set targets he knows cannot be met, which ostensibly includes his goal of shipping out a million cars by the end of 2020. The problem is that if there is nothing to anchor those long-term projections in reality, there is nothing to support share prices in the here and now. Investor hype can’t substitute for fundamentals, a reasonable valuation and a decent balance sheet.

Another striking issue is that the quality of TSLA’s products has suffered as Musk aggressively ramps up the pace of production. One former design engineer has filed an arbitration claim against TSLA after she pointed out various flaws in cars on the assembly line and was forced to resign. Last year’s Model X design was also criticized for its malfunctioning “falcon wing” doors.

Furthermore, TSLA is backpedaling on the language used in the description of its cars after a driver in Beijing who crashed in “autopilot mode” complained that the company overstated the functionality of the feature. As a result, TSLA completely removed the Chinese terms for “self-driving” and “autopilot” from its international site and replaced it with a phrase that translates as “self-assisted driving.” This is the second incident involving the autopilot feature in just a few months, after a man was killed in May when his Model S failed to activate its automatic brakes.

To be fair, compared to other juggernauts in the auto industry TSLA has barely reached pubescence. But with a market capitalization around $31 billion, there needs to be proof in the pudding to justify this stock’s inflated valuation. Sometimes when it comes to risky high-tech high-flyers, a little patience before buying in can help protect your money. I think TSLA as a whole could benefit if Musk had a little more patience, too.

Don’t Let the Bears Scare You

August 12, 2016, 12:20 pm

July was one of the strongest months for the stock market so far this year. With a weeks-long streak of multiple new record highs for the major indices, the bulls were clinking their champagne glasses while the bears searched for any reason to doubt the rally. Some have been watching the restaurant group closely, nervous that the recent slowdown in consumer spending is a sign that something more ominous is on the way. I disagree.

The market is in a very narrow trading range right now, earnings are behind us and we’re in the dog days of summer, so naturally things are going to be slower. Unfortunately, when things quiet down the bears start talking louder in an attempt to stir up fear that there’s a big sell-off right around the corner.

It’s been nearly eight years since the 2008 crash, so some pundits believe we’re due for another one. But all you have to do is look at the chart to see that’s not the case. Buyers are just taking a break and looking for the next leg up. We’ve regularly hit new highs over the last month, so this slowdown is healthy.

The other thing to remember is that we are in the midst of a very slow recovery, so we’re really not that extended economically. Of course, there are risk factors out there that I’ve talked about in previous blog posts. Auto sales are slowing and real estate prices are very extended in many urban locations, which is a potential asset deflation risk. But I don’t see any conditions that add up to an impending recession.

If you are still concerned and looking to make changes in your portfolio, you have to consider what triggers a recession and how severe it can be. In the past, some were caused by a spike in oil prices, turning oil stocks into a safe haven. That wouldn’t be the case here, and I would stay away from utility stocks right now despite the fact that they’re usually considered lower-risk options. Credit spreads, the difference between yield on government and corporate bonds, would rise and pressure these companies.

Ultimately, I believe the best course of action is to be proactive and stay ahead of the curve. It’s a good idea to focus your investments in lower-risk names that should hold up well in any market environment, taking profits when stocks appear fully valued and focusing on companies with high earnings visibility. You also don’t want to get caught up in a lot of high-fliers with lofty PEs that are vulnerable to any earnings disappointment. And even if the economy does slow, interest rates would most likely stay low, which would actually support companies that have reasonable valuations and can still grow earnings through recessions.

Regardless of whatever the market throws our way, as long as you’re watching macro trends and hedging your portfolio to account for downside risk, you’ll be in a good position to make money in the coming months.

Can Wal-Mart (WMT) Catch Up to Amazon (AMZN)?

August 10, 2016, 3:13 pm

Wal-Mart (WMT) made headlines this week after announcing the $3.3 billion acquisition of e-commerce start-up company Jet.com. It’s clear by the deal that management wants to step up the company’s digital footprint, but the question investors are asking now is whether this makes WMT a viable opponent to Amazon.com (AMZN), the current juggernaut of online sales.

AMZN has been cannibalizing the brick-and-mortar grocery business faster than WMT can shift that business to its own online properties. It’s why WMT management is pulling out all the stops to keep customers engaged. Consumables is a huge category, valued at around $675 billion a year in the United States, and WMT has roughly 25%-30% of that category sewn up. It’s a critical sector for WMT, accounting for more than half of the overall business by sheer dollar sales.

The good news is that around $13 billion of that business has already moved to Walmart.com and that slice is growing around 7% a year organically. The bad news is that it’s largely a matter of shuffling existing shoppers from store to site, rather than poaching from AMZN’s customer base. Meanwhile, overall WMT sales just aren’t growing that fast at 4% a year.

In a world where AMZN is here to stay, a win for WMT means staying relevant online. It’s not unlike the relationship between Pepsico (PEP) and Coca-Cola (KO)—the company just needs to be the second or third option people flock to in order to keep up sales.

With that in mind, absorbing Jet.com is a good step toward maintaining the status quo, which is the most WMT can hope for. Is it going to go a long way toward making WMT the top online grocery retailer on the planet? Probably not.

It’s true that AMZN makes direct comparisons tricky because it accounts for “electronics” and “general merchandise” together, but the core of electronics (the Kindle and other proprietary hardware) is worth somewhere around $16-$20 billion right now. That leaves about $30-$35 billion a year for general merchandise, which is the dish soap and snack food and other products relevant to WMT. AMZN is also growing incredibly fast in that category, and may grow that slice of the business by 30% this year alone.

Still, WMT has a slight long-term edge in terms of overall pricing (free shipping all the time versus Prime membership, generally lower prices and more responsive discounting). AMZN hasn’t been able to aggressively undercut on packaged food or soap because it doesn’t have the scale or inter-company relationships WMT does, so it simply charges standard retail on everything and lets convenience do the selling.

Plus, WMT has a secret weapon in terms of fresh food. It can still serve all of your grocery needs in a single transaction, which goes a long way toward overcoming the home delivery convenience factor. People need items that are difficult to ship: liquid foods, beverages, fresh produce, meat and other perishables. We’ll still be going to the supermarket for those products (for now) and when we’re there, it’s natural to pick up whatever dry goods WMT decides to keep stocking, snagging those dollars away from AMZN.

We may end up in a world where WMT dominates the part of the supermarket that can’t be shipped while also nibbling on its piece of the online world. That’s still a win for the company’s investors, even if it can’t knock AMZN down from its throne.

Eyeing AAPL Post-Earnings

August 5, 2016, 10:01 am

For the first time since its inception, Apple (AAPL) is starting to wobble on very serious doubts about the company’s future. Amid the slowing global smartphone market, AAPL consumers are upgrading less often and buying fewer devices …  and the pain is starting to show up on the company’s balance sheet.

On July 26, AAPL  reported its second straight quarter of falling iPhone sales, shifting most of the blame to overseas competition in China. The company sold 40.4 million iPhones in its fiscal third quarter, down from 47.5 million in the same quarter last year. Total revenue also fell over 18% to $40.4 billion from $49.6 billion the year before, while earnings fell 23% to $1.42 a share.

To make matters worse, sales were down not just for iPhones, but across AAPL’s entire product lineup. The company sold fewer than 10 million iPads and around 4.2 million Mac computers, versus almost 11 million iPads and 4.8 million Macs last year.

But there’s a silver lining here. Even though AAPL sold less units overall, revenue from those products actually rose year-over-year from $4.5 billion last year to $4.9 billion this past quarter. And while the earnings report as a whole was objectively lackluster, the numbers still came in above the modest estimates set by analysts.

In fact, despite the overall decline, the earnings beat fueled AAPL’s largest intra-day jump post-earnings since 2014.

aapl

Investors have kept their eyes glued on AAPL around the clock, so it seems that all of the negativity surrounding the company has already been priced into the stock. With the next iteration of the iPhone due for release in just a few months, most are hopeful it can inject some life back into the shares.

Unfortunately, if there is any optimism, it’s based mostly on speculation. The company has been furiously updating the latest iOS, but no one is quite sure what features or tweaks to expect when the newest phone hits shelves this year. In fact, many assume AAPL will hold off on the biggest changes until the following iteration in the cycle next year.

There have also been murmurs about an AAPL smartcar in development, but since management refuses to confirm any details, no one is willing to bet on the moonshot.

AAPL’s previous success has become both a blessing and a curse. Shareholders love the stock for the value it offers and its solid dividend, but because the company has become so large, growth from here will be incremental at best. I do think AAPL is a solid company; however, with no real catalysts in the near-term pushing the stock higher (other than analyst hype), upside may be limited.

VZ’s M&A Shopping Spree

August 2, 2016, 12:41 pm

Just one week after finalizing its acquisition of Yahoo (YHOO) for $4.8 billion, Verizon (VZ) is keeping the mergers and acquisitions (M&A) ball rolling with yet another buyout announcement: now, it’s absorbing Fleetmatics (FLTX) for $2.4 billion.

Despite its status as the largest wireless carrier in the country, it’s clear that Verizon is pulling away from its legacy telephone and Internet services as that area of the balance sheet continues to decline. Case in point: in its second-quarter earnings report, the company posted a 4% drop in revenue for the wireless business to $21.7 billion. At the same time, its Internet of Things (IoT) revenue of $205 million popped 25% from a year ago—which exemplifies VZ’s efforts to diversify and also helps explain its interest in FLTX.

Dublin-based FLTX’s biggest draw is its web-based GPS tracking systems, which allow fleet operators to monitor vehicle location, fuel usage, speed and mileage, and other insights into their mobile workforce.

While FLTX hasn’t reported earnings for the second quarter just yet, it was a critical couple of months. Management is expecting margins to improve following heavy investments in growth, with sales and marketing expenses up 26% and research and development (R&D) expenses up 49%. The European side of the business  had its strongest quarter ever—with sales accounting for 13% of the total, up from 9% last year—thanks to the company starting service in Italy. Plus, management is still in talks with General Motors (GM) about installing their equipment on GM’s new trucks and vans.

So it does seem like a smart buy on VZ’s part. But what’s the end game here?

Some analysts are speculating that the company’s plan is to build its revenue streams by connecting as many objects and appliances to its network as possible. Scooping up YHOO and AOL gave VZ further access to the consumer side of digital entertainment and advertising, while adding FLTX to its ecosystem grants additional exposure to enterprise services. VZ can now also carve out a slice of the IoT pie for itself,  as it generates revenue through FLTX’s existing customers like Time Warner Cable (TWX) and DirecTV (DTV), both of which employ large fleets of mobile workers.

Whether this round of acquisitions will add significant value to VZ remains to be seen, but it mostly boils down to how deftly the company can manipulate its new limbs. Even if there are signs of a downtrend, I think as long as the core legacy business remains relatively stable, it can help support management’s ambitious new ventures and turn VZ into something bigger and better. For now, I expect trading around the stock to be wonky as Wall Street digests the news.

Making Sense of the Yahoo (YHOO) Merger

July 27, 2016, 1:49 pm

It’s official: Yahoo (YHOO), a company and stock that has struggled tremendously in recent years, has finally found a buyer. Verizon (VZ) is shelling out $4.83 billion to absorb YHOO’s core Web business, marking the end of a tumultuous journey for the former dot-com juggernaut. Now, investors are trying to make sense of a deal that had hung in limbo for months.

While the buyout seems cheap to some—former CEO Jerry Yang turned down a $44 billion offer from Microsoft (MSFT) in 2008—many forget that there’s another $34 billion or so in assets left in the YHOO portfolio. Since YHOO will continue to hold those assets under a new ticker, Yang’s decision to turn down MSFT’s previous offer in exchange for a $4 billion deal now is a lot less boneheaded than it appears. Still, shareholders resent being up only 33% over the last six and a half years when they could have cashed out at 60% eight years ago.

The problem is that the core business simply didn’t perform. Management has tried valiantly to juice innovation over the past five years or so, but it was already too late—the company had become too big to generate enough world-shaking business to move the growth needle. This is the same issue Apple (AAPL) is now facing, but for YHOO it was a bit more complicated because its investment in Alibaba (BABA) was already becoming a huge point of contention on the balance sheet. Those assets were a new center of gravity that management couldn’t manage or replicate elsewhere in the Silicon Valley start-up community.

To her credit, current CEO Marissa Mayer did attempt to turn the ship around. Under her purview, the company sold off bits of BABA over the years and spent $2.3 billion of that cash to try and bolt on enough organic growth via acquisitions to grow into and beyond that initial $44 billion offer. Unfortunately, up until now results have been middling at best.

But now those assets belong to VZ. I suspect the legacy YHOO services will finally get shut down, while management looks for ways to take advantage of the other moving parts. Tumblr and Flickr, both previously owned by YHOO, will likely change.

Unless traders see a rare short-term opportunity to make money on a temporary mispricing between YHOO, the underlying BABA assets and the $4.2 billion in coming cash, I’d cross the ticker off my screens. It’s possible some genius CEO will turn the new version of YHOO into a dot-com version of Berkshire Hathaway, but there aren’t any signs of that just yet.

However, there are still opportunities here. YHOO was a big piece of several exchange-traded funds (ETFs) that will need to dump the stock once the core Web business is gone. As the deal gets closer, look for tech-focused indices to reweight by buying other companies to fill the hole YHOO leaves behind. Anyone holding tech stocks other than YHOO stands to get a lift when the deal closes and this dot-com survivor bites the dust.