Internet Information providers

Going through the companies classified as Internet Information Providers, I considered the following:

1. Market capitalization should be above US$1 B. Else, I believe the stock is vulnerable to whipsaw of price movements even from small players.
2. P/E should not be 50% above the industry average.
3. ROE should be equal or greater than that of the industry average.
4. Debt to equity, should not be greater than twice the industry average.
5. Price to book value should not be greater than 150% of the industry average.

1. Taking market cap, the following stocks qualified: AKAM, BIDU, CNET, EXPE (Expedia), GOOG (Google), SOHU, WBMD, and YHOO(Yahoo).

2. For Price to Earnings ratio, the Technology sector's average is 18.18, and the IIP's sector is 29.50. Hence, I consider 43 (150% x 29) to be the upper limit of PE for stocks. With this, AKAM, BIDU, GOOG, and SOHU dropped out.

3. For ROE, Technology sector's average is 14.33%, while IIP's is 14.60%. Taking this into consideration, EXPE (6%), WBMD (11.3%), and Yahoo (10.96%) dropped out. CNET alone remains.

4. For debt to equity ratio, Technology has 0.68, while IIP has 0.08. Doubling this (0.16), we find that CNET's ratio (0.13) is within acceptable range.

5. Price to book value scenario is the same. Tech has 5.20, while IIP is 6.38. PB ratio then should be below 150% of 6.38 or 9.57. CNET's P/B is way below at 2.43.

The five way test then produces a winner - CNET!

After the fundamentals, we can check its technical specs. I used only 50 and 200 day averages, and the MACD indicators, to check its long term trend.

CNET passed the technicals test - although at this point it is not clear whether the direction will be for the long term. Heck. Buy CNET at 7.50