Flip It: Long a favorite short, Yahoo's now a buy

For many years off and on, I used to short Yahoo. I ran a hedge fund before I took this job as a TV dude. We were a tech-centric, long-short equity hedge fund which means that I mostly traded tech stocks and bought and sold options on tech stocks.

And for years, I used to pair my long Google positions, which I bought the day it came public and owned until I closed the fund, with a short Yahoo position. In other words, I owned GOOG stock and sometimes GOOG calls and I'd often try to hedge the "market risk" of owning an Internet stock by shorting and/or buying puts in another Internet stock, in this case, Yahoo.

I wrote about a lot of my trades and strategies and you can read my past analysis as to why I owned Google, with its much higher margins and its deadly focus distribution of content rather than ownership of content vs Yahoo, with its much lower and declining margins and market share and its misguided fascination with creating and owning content, was a good trade by clicking on this link to a search of Google News Archives for "Cody Willard GOOG YHOO".

You can also watch this vintage Internet Video when Aaron Task from visited my old offices in Soho and asked me about the paired Google vs. Yahoo strategy.

I bring all this up because I think it's time to "flip" my stance on Yahoo and go from bearish to bullish on the name. (Hey, I'm a TV pundit now, not a trader...so I don't short or buy Google or Yahoo or any other stock anymore.)

Yes, Yahoo's now a buy and I think the stock can work its way higher over the next month and over the next year. And not coincidentally, the reason I like this stock these days is because it's changing all of my bearish bullet points above.

Yahoo's not losing much market share any more...it's not exactly stealing market share from Google or Bing, but even holding search and Internet ad market shares even is a reason to stop hating on the stock.

And while the company does still waste precious money on creating and licensing Yahoo! branded content, it's no longer increasing its spending on such things and indeed is cutting back on a lot of spending on branded content.

And that's really why the stock's gonna work here. Rookie CEO Carol Bartz is on a serious cost-cutting mission and the results are likely to be earnings and EBITDA in 2010 that are much higher than Wall Street's finest expect. Assuming Bartz gets operating margins up to the 15-20% she's shooting for, earnings on flat-to-slightly-higher revenues in 2010 would mean the Street's 30% too low on their own estimates for earnings.

Oh yeah, the company's also has 40 international prorperties in 25 different languages, many of which are marketshare leaders/takers, including their recent purchase of Middle Eastern portal, moktoob.

The stock will gyrate with the broader markets of course, and on that note, I'd note that I'm still bearish about the broader indices and expect them to head lower from the 10,000 ceiling they've failed to bump up though.

I'm flipping my stance on Yahoo and because of the momentum in the stock and the fundamentals, it's my best pick for November.

Get more analysis like this in my newsletter at http://RevolutioNewsletter.com.