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Yahoo! Inc. (YHOO) & Virgin Media Inc. (VMED): Dan Loeb’s Top Two Positions in April

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Dan Loeb Third PointDan Loeb, the famous hedge fund manager, recenlty released his Third Point’s letter for shareholders for April. The fund, with $12.9 billion in total AUM, returned only 1.4%, less than the S&P 500’s return of 1.9%. Its year-to-date results came in at 10.5%, also lower than S&P 500’s gain of 12.7%. However, since its inception in December 1996, his fund has returned handsomely for investors, with an annualized gain of 17.9%, much higher than the annualized return of S&P 500 at only 6.6%. The fund’s two top positions are Yahoo! Inc. (NASDAQ:YHOO) and Virgin Media Inc. (NASDAQ:VMED).

Yahoo! refreshes itself

Third Point has recently gained considerably with Dan Loeb’s big bet on Yahoo! Inc. (NASDAQ:YHOO). He owns around 73 million shares in the company, accounting for 26.6% of his total portfolio at the end of 2012. Yahoo! is on the way to reinventing itself under the leadership of the new CEO Marissa Mayer. In February, Yahoo! Inc. (NASDAQ:YHOO)’s front page was changed to a streaming headline format for users to customize the page in a brand new way. Moreover, the company recently rolled out its two new ad units, Stream Ads and Billboard. The Stream Ads are embedded into users’ home page news feed, while the Billboard offers users interactive contents and let users buy movie tickets right from the ad.

What is truly valuable about Yahoo! is its 20% stake in the Chinese e-commerce giant Alibaba. According to DealBook, with 30% operating margin and 15% tax rate, Alibaba would earn around $3.8 billion in 2014. If an earnings multiple of 25 was applied, Alibaba could be worth as much $95 billion on the market. Consequently, Yahoo! Inc. (NASDAQ:YHOO)’s 20% ownership of Alibaba could be valued around $19 billion. Yahoo! is trading at around $25 per share, with a total market cap of $27.7 billion. Excluding the potential value of Yahoo! Inc. (NASDAQ:YHOO)’s stake in Alibaba, Yahoo! alone is worth only around $8.7 billion.

Virgin Media and its merger with Liberty Global

Virgin Media Inc. (NASDAQ:VMED) has kept investors upbeat with its strong first quarter earnings results. The revenue grew by 3.6% to more than £1 billion while the operating income increased by 14.4% to nearly £150 million. Interestingly, its free cash flow experienced a year-over-year growth of as high as 54% to £135 million, thanks to higher operating cash flow, lower capital expenditure and lower interest rate. In the first quarter, the company has grown its cable customer by 8,600 with the improved churn of 1.1%, lower than the churn rate of 1.2% in the first quarter last year. The Cable Average Revenue Per User (ARPU) rose 5.2% to £49.38. What makes me more excited is the great growth in its next generation TV services, TiVo Inc. (NASDAQ:TIVO). Virgin Media Inc. (NASDAQ:VMED) has managed to increase the number of TiVo Inc. (NASDAQ:TIVO)’s customers to 1.5 million, accounting for 40% of its total TV base, while paying TV customers reached 3.3 million, representing 87% of its total TV base.

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