My First Stock Crush for 2013

Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

“Be the change you want to see in the world.” – Mahatma Gandhi

Completely imitated, often duplicated, not at all anticipated, it’s finally arrived: my first crush of 2013. Like many of you, I’m sure, I have had a very long relationship with Yahoo! (NASDAQ: YHOO), in some form or fashion, and not necessarily as an investor. And although it goes completely against my harsh exterior, I do enjoy a “feel-good,” “comeback” story every so often.

Since current CEO Marissa Mayer left Google (NASDAQ: GOOG) in mid-July last year and entered the corner office at Yahoo!, the company's stock has climbed 24%, and I have been mildly intrigued. Mayer was a first-team All Star at Google, but the giant search engine machine hasn’t skipped a beat, moving up over 25% since her departure.

Yahoo!’s steady move up isn’t just about numbers, clearly evident from the first investor call that the new CEO led. This simple quote from that call speaks volumes, “My goals are simple: To execute faster, hire top talent, and make Yahoo! the absolute best place to work.” Saying and doing are two completely different animals, but Mayer is definitely filling the conference room with top talent, nabbing a seasoned veteran as CFO (Ken Goldman), and former Google co-worker Henrique De Castro sitting in the 2nd chair as Chief Operating Officer.

And the emphasis on a healthy work environment has to be a relief to Yahoo! employees, especially considering the recent avalanche of CEOs (5 in as many years). This seems like it would be incredibly counterproductive. So the ongoing mood change and warm, fuzzy company climate should be factored along with attractive company valuations.

With the successful efforts at stabilizing executive management, now Yahoo!’s focus can be shifted to the numerous tasks at hand. Mayer will get a shot at spinning magic during the Consumer Electronics Show (CES), underway this week, possibly offering up something more appealing than what Microsoft (NASDAQ: MSFT) CEO Ballmer is dishing. And while investors patiently wait for the “right” time to get into Microsoft, I think Yahoo! offers a bit more upside this year, although without the solid 3.4% dividend yield Microsoft pays loyal shareholders.

Yahoo!’s price-to-earnings ratio is currently around 6 (Microsoft is at 14, Google about 23), and the company's price-to-book is around 1.5 (Microsoft 3.2, Google 3.5). It’s even more attractive below $19 a share, which is a spot I would consider scaling into for a long position. There’s no need to go “all-in,” as this could prove to be a bumpy year, but I think there’s $5 to $6 upside by this time next year.

Yahoo! has some challenges ahead, and there are definitely feelings of “enough already” and “not again” swirling around the digital advertising folks. But Mayer is proving to be the right choice, for the first time in 5 years, and it appears as though she has the troops headed in the right direction even while they enjoy every minute of it along the way.

kmet312 has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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