Some trading action

Sold BAC.

Added to NYT, YHOO.

BAC still has room to go up potentially. But I sold it because it is a position that I followed somebody into. I don't know much about the stock, other than it was beaten down and cheap. Then Warren Buffett took preferred shares with a conversion at $7. So when the opportunity came to buy at $6.50, I said yes. I only do that for investors who I am confident know what they are doing. But my general rule is that when I merely follow someone into a trade, without fully understanding the business, I sell after a 20% gain. So out goes BAC with a nice, but small, profit.

In goes NYT. I really like them. They are differentiating themselves from the rest of print media. The paywall is genius. The writing is superb. The quality of research is excellent. The company is making money. It has a $1 billion market cap, and they own about.com (worth maybe $50 million), shares in the Red Sox (worth about $100 million), and the Boston Globe and International Herald Tribune (worth maybe $150 million). So the underlying business is selling for $700 million. They have about $550 million in employee pension liability. $3 billion in annual revenues. Profits are rising because of the paywall, and advertising is starting to bounce back. When you look at the newspaper industry, the Times stands at the top of all papers in the world, without a doubt, along with the Wall St. Journal and a couple others. They are well-managed. Trading at a 11x forward earnings. Large growth prospects if the paywall is managed correctly. I like it.

YHOO I am mostly following Dan Loeb into this trade. They own parts of Yahoo! Japan, Alibaba, and other international web sites worth more than their market value. He bought at $15, and the chance to buy months later at the same price is a nice opportunity. There are some tax regulations they would have to avoid if they were to sell the shares of their international companies. But he has a large position and a seat on the board and I trust his due diligence that he will be able to unlock the shareholder value. Like most of my "follow in" trades, if it gets to $18 (20% gain) I'll sell it. Another reason I like Yahoo! is because of the phenomenal research the Yahoo! Sports department does, which shows there is some value in the American branch of the company's operations. Yahoo! Finance is also a nice web site.

[Note - this was originally posted in March 2012.  I am editing it in January 2013.  It is interesting how far off I was on the value of About.com.  The Times recently sold About.com for $300 million.  If I had paid better attention to the quarterly reports I would have been able to value the About group better.  Sometimes it helps to be lucky.]