From the Motely Fools' boards:
Quoting from
investor.msn.com
we find that, although not an exclusively Internet business, the Internet does figure definitively in CMGI's long-term strategy.
CMGI is a direct marketing company that through a series of successful maneuvers has recast itself as a very promising
Internet company. To quote: CMGI (formerly CMG Information Services) is all about using the Web as a distribution
channel. CMGI funds, develops, and takes a hands-on role in startup Internet firms through @Ventures, its investment arm.
CMGI's investments include some of the Web's biggest sites, including Lycos and virtual community GeoCities. Wholly
owned startups include Engage Technologies, which is compiling a vast database of behavioral information about Web
users; and Planet Direct, a personalized portal marketed through Internet access providers and affinity groups. It also owns
34% of Hollywood Entertainment, which runs the US's #2 video store chain (behind Blockbuster).
As we've been discussing on the CMGI board, the CMGI officers are currently considering among 9 Internet startups in their
pipeline for IPOs sometime in the next 10 months.
brooktrout: << -approx 1B mkt cap >>
At today's close of 73.25, CMGI's market cap is $1.7billion. My personal analysis -- take this with a grain of salt and please
do your own research and analysis -- leads me to believe that CMGI's stock has a serious chance of being a 10-bagger
within the next five years.
brooktrout: << -double digit profit margins already >>
Even though CMGI is currently running red thanks to some one-time investments in some very promising Internet startups
and wholly-owned subsidiaries, it should be noted from their annual return that CMGI's current net profit margin is 18.1%.
Compare this with AOL's current net profit margin, which MSN Investor reports as 5.3%.
brooktrout: << -leading/dominating it's "niche", (a niche that should be required) >>
CMGI is peerless in two niches: 1) companies doing direct marketing over the Internet, and 2) companies providing venture
funding to Internet startup companies at very early stages in their development. Note that niche 1 is an area that has barely
been tapped -- and that the ability to customize marketing on the Internet to serve both companies' and consumers' needs has
tremendous potential. Note that niche 2 is an area that has in the past led to CMGI's ownership in a significant number of
shares of LCOS, GCTY, AMZN, AOL, OMKT, HLYW, and others -- stocks whose prices have appreciated considerably,
giving CMGI huge returns on their investments. Their track record with their Internet venture funding divisions have been
almost impeccable since they started doing this four years ago with a sale to America Online.
brooktrout: << -have a stream of income from it's customers >>
CMGI's direct marketing divisions have been involved in lots of non-Internet related direct marketing, especially of the
lucrative college market. In addition, CMGI's pipeline of Internet investments should generate a steady stream of income
through taking more than a dozen companies public in the next two years alone. And don't underestimate the value of synergy
among all of CMGI's subsidiaries, startups still developing, startups brought public, and strategic alliances with big players
like MSFT, INTC, AOL, AMZN, LCOS, and Paul Allen.
brooktrout: << -beat the street estimates last 5Q, possibly more(I can't see any farther back) >>
Hmmm. I don't have access to these numbers, but here are the earnings for the last four years.
stockmaster.com
Note that the recent quarters of negative earnings were mainly due to one-time investments in promising Internet startups.
For what it's worth, last quarter, EPS was $1.38 and analysts' consensus was ($0.54), due to (among other reasons) some
one-time sales of Lycos:
biz.yahoo.com
An interesting analysis of this was sent as post 305 to the CMGI board:
boards.fool.com
You will notice a trend in this company the more you look into it: one-time sales and one-time investments allow the company
considerable manipulation of their financials from quarter to quarter. As a marketing company, CMGI is quite capable of spin,
and CMGI understands how to release financials for positive impact.
This can make it difficult to properly value CMGI. For example, look at this attempt in September:
messages.yahoo.com@m2.yahoo.com
By most valuations I have seen, CMGI's total holdings' value right now is higher than their market cap, making this stock a
reasonable value play as well. Also, CMGI has proven a solid performer not for one year or two years but five years in the
stock market. This is not a fly-by-night operation; this is an Internet blue chip, if there is such a beast at this point in time,
much like AOL and AMZN and YHOO. There's a nice report of CMGI as the TMF Daily Double on August 29, 1997:
fool.com
brooktrout: << 0.01 debt /equity ratio >>
You must have read my mind. Again at
investor.msn.com
we find that CMGI currently has a debt/equity ratio of precisely 0.01. Hey, were you posting to try to troll me into posting
about CMGI again?
brooktrout: << less than 300 employees >>
According to
quicken.com
there are currently 505 employees. Close enough?
brooktrout: << stock triple in value YTD :) >>
I can do better. Check out
investor.msn.com
which gives a 12-month change of 463.5%, giving CMGI a relative strength of an unbeatable 100. Even AOL "only" has a
12-month change of 319.8% -- so you'd have to go to an AMZN, YHOO, or EBAY to find a better return these past 12
months. Actually, EBAY hasn't even been around 12-months; CMGI has traded publicly longer than AMZN, YHOO, and
EBAY combined .
Unlike AMZN, YHOO, or EBAY, though, I think CMGI has lots more room to grow in the short-term. As I said earlier, by
most analyses I have read, the value of CMGI's holdings in total is worth more than CMGI's current market cap. CMGI is a
rarity among its Internet brothers, just as it is a rarity among its venture capital brothers and a rarity among its direct marketing
brothers.
One more point I want to reiterate is that I cannot stress enough the importance of good management, and David Wetherell is
in my humble opinion the epitome of an excellent CEO. Read the TMF Interview with him on October 1:
fool.com
I really like the following dialogue, because CMGI's philosophy is readily applicable to CMGI itself:
TMF: As an investor, how do you figure out how much an Internet venture is worth?
Wetherell: Since a lot of them don't have revenues when we invest, or they're really in the very early stages like in the case
of Raging Bull, we look at the fundamental metrics surrounding the business: opportunity to capture a lot of audience, lots of
page views, lots of eyeball time, traffic, and the ability to maybe target that eyeball time -- in other words, chat, though it
generates a lot of page views and eyeball time, it's very difficult to target the audience because you're not really sure from an
advertising perspective what kind of content your ad's going to be associated with, even though you may know something
about the interests of the users. And there isn't good evidence that when people are in chat rooms they even look at the ads
anyway -- they're really more busy reading the content of the chat rooms.
So we look at the dynamics of the website visit, the type of traffic, the quality and quantity of traffic, and the targetability.
We also look at what kind of complementary fit there is with our other investments and internal Internet group of companies.
If it's a complementary fit, we can leverage up the relationships we have with these other companies to help that investment
and thereby help them increase the return on investment that we end up realizing.
This is a man who has thought long and hard about the future, and has a compelling vision, and has the leadership to guide
many companies and many people toward that vision. I, for one, believe.
Also, read these comments from him on the Yahoo board:
geocities.com
And, read the comments from this analyst about CMGI's prospects for the next 10 years:
members.tripod.com
One more link, to the CMGI board at Raging Bull, so that you know that not just the posters on the TMF CMGI board and the
Yahoo CMGI are bullish on CMGI's long-term prospects:
ragingbull.com
Did I mention that Raging Bull is one of the Internet startups in which CMGI has recently invested and hopes to IPO
sometime in the next 2 years?
Of course, all the information I just wrote give you just some of the reasons I am a long-term buy & hold on CMGI. But
please, don't take my word on it. Follow the above links, do your own research, and make your own decisions... |
