Yandex IPO: 3 MORE reasons to invest in the ‘Google of Russia’

Yandex earned $134 million last year on revenue of $440 million. That fact alone gives it a boost over other high-profile tech IPOs like LinkedIn, which is forecasting a net loss in 2011.

I’d recommend waiting until volatility dies down after Yandex’s first few days of trading, but I’m convinced the long-term prospects for the company look good – at least as long as the political situation in Russia remains stable.

Late last month, I laid out 5 reasons to invest in Yandex stock, and now that Yandex’s IPO date (NASDAQ:YNDX) is upon us and shares are set to start trading today (on May 24, 2011), I’d like to offer a few more bullish arguments for the “Google of Russia.” Here are three MORE reasons to invest in the Yandex IPO:

1) More than Russia. Yandex dominates the Russian search market, but the search engine’s actually headquartered in The Netherlands. Yandex also operates in Ukraine, Kazakhstan and Belarus, and the company has an English-language version of its search engine (Yandex.com) in alpha testing right now.

While Yandex.com is nowhere near as fast or comprehensive as Google, it does have some interesting features. For example, when browsing through search results, you can hold down the CTRL key and hit the left or right arrows on your keyboard to move to the next or previous page of search results (just make sure your cursor isn’t in the search box to activate the function).

Currently, the Ukrainian version of Yandex (Yandex.ua) is the sixth most-visited site in the Ukraine, the fourth most-visited site in Kazakhstan (Yandex.kz) and the fifth most-visited site in Belarus (Yandex.by), according to stats from Alexa.com.

2) The Wild Wild Web. Just 43 percent of Russians currently have Internet access, per InternetWorldStats. Compare that with the more mature Internet market in the U.S. where 77 percent of the country has Web access.

To reach the maturity of the U.S. market, web access in Russia will need to rise nearly 80 percent in the coming years. That would exponentially drive up the number of pageviews served up by Yandex and increase the site’s advertiser base. Last quarter, Yandex served ads for 127,000 advertisers in Russia. That’s up more than 35 percent year-over-year, according IPO documents the company filed with the SEC.

3) Buyout by Google? One of the more interesting arguments for Yandex shares is that the company could be a potential acquisition target. Yandex owns more than 65 percent of the search market in Russia while Google controls just 20 percent of Runet searches. Russia’s booming online ad growth could bolster Google’s bottom line for years to come.

“If I were Google and looking to grow my Russian presence, that would be one of the options,” Uralsib analyst Konstantin Chernyshev told Reuters last week. If any company has deep enough pockets and a strong enough interest in acquiring Yandex, it would be Google (the same company that acquired social search engine Aardvark last year, and dropped $3.1 billion to buyout online advertising company DoubleClick in 2007).

If nothing else, we can take solace in the fact that Yandex is actually profitable. The company earned $134 million last year on revenue of $440 million. That fact alone gives it a boost over other high-profile tech IPOs like LinkedIn, which is forecasting a net loss in 2011. Tech may indeed be in another bubble, but companies like Yandex should be able to weather the turmoil when the bubble pops. It’s all about the rubles, after all, and Yandex has proven it can pull them in.

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Netflix stock performance predictions for 2011 (NFLX)

Twelve months ago, you could have bought a share of Netflix, Inc. (NASDAQ:NFLX) for $72. A single share will now set you back $221. Still, we still see lots of reasons why Netflix stock can go even higher in 2011.

Twelve months ago, you could have bought a share of Netflix, Inc. (NASDAQ:NFLX) for $72. Let’s call those the good old days. Since then, Netflix has screamed up more than 200 percent with 26 percent of those gains coming since the start of 2011. A single share will now set you back $221.

My finance and I have an ongoing argument about shares in Netflix. She feels like the company has started exiting the growth phase with a one-way ticket to Value Stock Valley. Yes, she’s got some valid arguments: the company DOES face more realistic competition (ala Facebook, Amazon, Hulu, etc.) than it did a year ago, and I’ll readily admit they could use a better selection and more new releases (which will only come at the expense of margins). Still, I’m optimistic about Netflix’s stock performance in 2011. Here are three reasons why:

1) Global domination. A Credit Suisse note out yesterday titled “Don’t Stop Believing,” gave Netflix two very enthusiastic thumbs up with an analyst there upgrading the stock from Neutral to Outperform. The reason? International growth. Credit Suisse predicts Netflix’s subscriber base will triple to 69 million subscribers by 2016 on the strength of growth abroad.

Apparently, The Canada Experiment has been a good one so far. When Netflix opened its doors to subscribers in the north late last year, Credit Suisse predicted they’d reel in 300,000 subscribers by the end of 2011. That was a pitifully low estimate. After just six months, Netflix has 900,000 subscribers in Canada. Online streaming is the future, and there’s no one better positioned to capitalize on that future than Netflix – no matter what country you’re in. (FYI: Credit Suisse raised its price target on Netflix’s stock from $180 to $280).

2) One ring does not rule them all. Fears over Netflix’s competition feel overblown to me. It’s as if we believe people only want to stream video from a single source. Riiiiggght. I’ve got a Netflix account, but I still occasionally rent movies via Amazon’s online rental service. I still check videos out from the Blockbuster kiosk at my local Speedway, and very occasionally I log onto Hulu (even though the site’s ads make me want to vomit). Just because I can watch The Dark Knight on Facebook for a one-time fee, I’m not going to run out and cancel my Netflix account. We’re used to seeking out entertainment from multiple services. That’s not going to change because Facebook starts offering a small, boutique-y selection of movies.

3) Shoot the networks. In a move that could shift power away from networks and studios like HBO and Showtime, news broke last week that Netflix is wading into the content production pool. The company struck a deal with the film studio Media Rights Capital to produce an original series that will stream exclusively on Netflix servers starting late next year. Kevin Spacey will star in a political drama dubbed “House of Cards.” The series, which is being billed as “a satirical tale of power, corruption and lies,” will be directed by the rather brilliant David Fincher (whose portfolio includes The Social Network, Seven, Fight Club and The Curious Case of Benjamin Button). It’s a big roll of the dice for Netflix – and it’s one that I fully expect to pay off.

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How to invest in the stock market

Here’s a quick and dirty guide for the complete novice who wants to learn how to invest in the stock market.

Here’s our quick and dirty guide for learning how to invest in the stock market for the complete novice:

1) Determine the type of trading account you want to open. Opening an account is simple. There are literally hundreds of online brokers to choose from. If you’re just getting started, I’d recommend Zecco.com or Scottrade.com. Both are cheap and fairly straightforward, and they do a good job of walking you through the sign-up process.

All you need to get started is some cash, time to fill out the required forms and an understanding of the type of account you’d like to open. If you want to invest in the stock market, but you’re not necessarily doing it for retirement, you should open an “Individual Account” rather than an IRA. Your gains in an individual account are subject to taxes and you’re also allowed to write-off losses. Best of all, you can transfer money out of your individual account without being subject to the penalties you’d have to pay if you were trading via an IRA.

If you’re planning to invest for retirement, you should open an IRA trading account. There are two types: Traditional IRAs and Roth IRAs.

Traditional IRAs allow you to deduct your contributions from your tax return every year (effectively meaning you pay less in taxes while you’re working). When you reach retirement age and withdraw cash from your Traditional IRA account, you will be subject to taxes. Roth IRAs are not tax-deductible, but when you withdraw your cash after retirement, you don’t have to pay taxes on those withdraws. In general, less sophisticated investors should opt for a Traditional IRA.

2) Determine whether or not you want to trade on margin. While filling out the required forms to set up your account, you’ll be asked a barrage of questions. One key question is whether or not you’d like to apply for a margin trading account. Margin accounts function like a line of credit that your broker extends to you so that you can invest more money than you put into your account. This also means you can lose more money than you put into your account. I wouldn’t recommend jumping into investing and immediately opting for a margin account. In the words of billionaire investor Warren Buffett: “Leverage is the only way a smart guy can go broke.” Important note: Margin is only available in individual accounts, not IRA accounts. You’ll also be charged interest on the cash you borrow from your broker.

3) Wait for your funds to clear. After you’ve set up your trading account, you’ll be asked to fund your account. Typically, brokerages will require an “initial deposit” of $500 or more (in some cases as much $2,500) to activate your account. These funds can be deposited electronically, by check or via wire. Of course, you’ll have to wait to wait for the funds to clear. Once they do, you’ll generally be notified via email that your account is credited and available for trading.

3) Place your first buy order. To place your first buy order on the stock market, you’re going to need to know the stock ticker for the company you’d like to invest in. An easy way to figure this out is by going to Google Finance and typing the name of a company into the search bar at the top of the page. For example, if you searched for Apple, you’d be taken to Apple’s quote page where you’d see the company’s ticker is AAPL.

Now that you have a ticker, return to your broker’s site (at Zecco, Scottrade or wherever else you chose to open a trading account), log in and hit the “trade” link. You should now see a series of boxes where you can place your order. Place the ticker (“AAPL”) in the ticker box, and indicate the number (or “quantity”) of shares you’d like to buy. Today, Apple shares are trading at $345.43. Therefore, if you enter a buy order for 10 shares of AAPL, your total cost would be $3,454.30. That’s an extreme example, of course. Most shares cost far less than $345.

While entering your buy order, you’ll see options for the type of buy order you’d like to place. Those options include a limit order or a market order. In most cases, a market order will suffice. That means you want to buy a specific number of shares at “market” price. But what’s market price? In essence, a market buy order means you’ll pay the cheapest available price to acquire shares in a particular company. For high-volume stocks (stocks with a trading volume of 500,000 shares or more per day), your order should get filled at or near the current quote price.

For shares that don’t change hands very often, you’ll want to avoid placing a market order since there may be a significant gap between the “market” price and the “ask” price. Let’s say for example you want to buy shares in Company XYZ, and the current quote for the shares is $2. Unfortunately, Company XYZ doesn’t get much action on the NYSE. Let’s say the company’s got a trading volume of 5,000 shares. That means just 5,000 shares change hands every day. Since the market is open from 9:30 a.m. to 4 p.m. EST, that’s not much trading. There may be stretches of several hours throughout the day when no one buys or sells shares in Company XYZ.

There are, however, a few people who want to sell shares in Company XYZ, and they have a standing order on the market to sell shares only if the price hits $3 (what’s known as a sell limit order). If you blindly submit a market order for shares in Company XYZ, and the only current seller is some guy who’s asking $3 per share, your buy order will be matched with his sell order, and you’ll be the proud owner of shares in Company XYZ at a cost of $3 per share – even though the quoted price was only $2 per share! Since no one was willing to actually sell shares at $2 per share, you got paired up with someone who was willing to part ways with his shares for $3 per share, and you just paid a 50 percent premium on the cost of the shares! That’s not a great way to make money trading stocks.

So, how can you avoid that? Place a limit order instead of a market order. If you want to buy shares in Company XYZ, but you’re only willing to pay $2.01, you can select “limit order” and enter a limit order price of $2.01. Your buy order will then be triggered ONLY if there’s someone out there willing to sell their shares for $2.01 or less.

You can get even more fancy with your buy orders by taking advantage of “buy stop orders”, “buy stop limit orders” and “buy trailing stop orders”, but those fall outside the purview of this column. For the vast majority of beginning traders, market orders and limit orders will suffice.

4) Place your first sell order. It’s a been a few weeks since you bought shares in a particular company, and hopefully, share prices have risen. Now, you want to sell your shares and pocket the gains.

Selling shares is as easy as buying shares. Just click on the number of shares you have in your account and place a sell market order or a sell limit order. A sell market order means you’re willing to sell shares at any available price. A sell limit order means you’re willing to sell your shares, but only if there’s a buyer out there willing to pay the price you’ve set. Congrats. You’ve just bought and sold your first few shares! I’ll be posting common pitfalls to avoid in the coming weeks. Good luck!

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Big Day for American Apparel (APP)

American Apparel — the cotton-happy clothing company — has had more than its fair share of troubles. Today’s earnings report could shed some light on the company future.

American Apparel Inc. (AMEX:APP): The cotton-happy clothing company with factories in the great U-S-of-A has had more than its fair share of troubles. They bleed cash like an ATM, and they’ve been hit hard by the Great Recession. Hipsters, after all, can’t afford high-quality cotton when they’re not getting tipped at Starbucks. The company’s had to tighten the drawstrings on their sweatpants and beg for cash (and loan extensions) over and over again. Its gotten so bad, that the stock’s right around its all-time lows. Read: people think they might go bankrupt. Analysts are predicting a loss of .22 cents per share. That’s more than $15 million. Expect lots of volatility either way. The stock was up 8 percent on Friday. If the stock beats expectations, expect a temporary pop. Sell now, and buy back in a week. No one sees a profit in their future anytime soon — and that likely means prices will remain depressed for some time to come.