Yahoo
Buying Yahoo was to buy Taobao — American investors hadn’t started looking at Taobao yet, and that’s why it was a cheap opportunity
🏢 Company Profile
Yahoo is one of Duan Yongping’s important US stock investment cases, and also the case where he most thoroughly explained his discounted cash flow valuation method. Duan Yongping’s core logic for buying Yahoo wasn’t optimism about Yahoo itself, but indirectly holding 40% of Alibaba Group (including Taobao, Alipay) through Yahoo — this portion of assets at the time was essentially “free.”
📅 Investment Timeline
| Time | Event | Duan Yongping’s Judgment |
|---|---|---|
| February 2010 | Bought Yahoo; market cap ~$21.5 billion | ”The reason Yahoo is cheap is very simple”; actual cost only ~$7 billion |
| March 2010 | Continued adding position | ”Worth 15 then |
| April 2010 | Detailed breakdown of valuation logic | Per-share net cash 6.7 + Yahoo itself 19.30; Taobao portion is “free” |
| During holding period | Sold NetEase to rotate into Yahoo | ”My reason for selling was needing to rotate into GE and Yahoo” |
| Later | Sold Yahoo to rotate into Apple | ”Later everything got rotated into Apple” |
💡 Why Duan Yongping Bought Yahoo
Core Logic: Buying Yahoo Was to Buy Taobao and Alibaba Group
“I think I’ve been clear from the beginning — I bought Yahoo to buy Taobao and Alibaba Group. So as long as Yahoo is decent, that’s fine.” (Source: Investment Logic, 2010-06-01)
Valuation Breakdown (2010, when per share ~$15):
| Asset | Value per Share (USD) |
|---|---|
| Net cash | 3 |
| Yahoo Japan (30%) + Alibaba HK listed portion (30%) | 6.7 |
| Yahoo itself (at 12x PE, EPS $0.8) | 9.6 |
| Subtotal (excluding Taobao) | 19.3 |
| Alibaba Group 40% (including Taobao, Alipay; Duan estimated ¥50B value) | Free |
“No matter what everyone thinks about Taobao’s prospects, my understanding of most American investors is that they haven’t even started looking at Taobao yet. Perhaps this is exactly why Yahoo can be cheap.” (Source: Investment Logic, 2010-04-03)
💡 Core Value of This Case
1. Identifying Hidden Assets
Yahoo was one of the cases Duan Yongping explicitly mentioned of “listed companies with hidden assets not reflected on their books.” The value of Alibaba Group (unlisted portion) wasn’t reflected in Yahoo’s financial reports at all — yet this was precisely where the greatest value lay.
2. Complete demonstration of rough estimation
Duan Yongping demonstrated his valuation method in this case: not pursuing precision, only judging “this price is obviously cheap.” “My rough estimate is that US Yahoo is worth around 15, and other investment value is also worth around 15.” (Source: Investment Logic, 2010-03-01)
3. Teaching case for discounted cash flow
Using Yahoo as a prototype, Duan Yongping created the fictional company “US Tiger Tooth” to demonstrate the calculation method for discounted cash flow in detail — the most complete valuation teaching case in the entire knowledge base.
4. Opportunity cost-driven rotation logic
Duan Yongping first sold NetEase to rotate into Yahoo, later sold Yahoo to rotate into Apple — each rotation was based on opportunity cost judgment — hold whichever is cheaper, not because of bearishness on any particular company.
❓ Selected Q&A
Q: Have you ever invested in listed companies with hidden assets not reflected on books?
**A}: Yes. Yahoo was one. Uhal back then too.
Source: Duan Yongping Investment Q&A (Investment Logic), 2010-03-27
Q: Does Yahoo have any advantages?
**A}: I think I’ve been clear from the beginning — I bought Yahoo to buy Taobao and Alibaba Group. So as long as Yahoo is decent, that’s fine. Alibaba’s corporate culture is the best-written corporate culture I have ever seen among Chinese companies. Having such excellent corporate culture plus having already found such an excellent business model, it would be hard for Alibaba not to succeed! This is also the most important reason I’m willing to buy Yahoo!
Source: Duan Yongping Investment Q&A (Investment Logic), 2010-04-04 / 2010-06-01
**Q}: If you had ¥20 billion, what would you do?
**A}: Hehe, if I had ¥20 billion now I’d just buy Yahoo.
Source: Duan Yongping Investment Q&A (Investment Logic), 2010-03-26
💬 Original Excerpts
“I think the reason Yahoo is cheap is very simple: …based on market cap, buying Yahoo now actually costs only around ¥7 billion. …By the way, forgot to mention Taobao and Alipay. I can’t say exactly how much Taobao and Alipay are worth, but it doesn’t seem too important, because no matter what they’re worth, they’re free. Though not entirely unimportant either, since this is my biggest reason for buying Yahoo.” (Source: Duan Yongping Investment Q&A (Investment Logic), 2010-02-08)
“No matter what everyone thinks about Taobao’s prospects, my understanding of most American investors is that they haven’t even started looking at Taobao yet. Perhaps this is exactly why Yahoo can be cheap. After a few years, perhaps people will gradually notice that piece.” (Source: Duan Yongping Investment Q&A (Investment Logic), 2010-04-03)
“Without Alibaba Group, Yahoo wouldn’t be cheap.” (Source: Duan Yongping Investment Q&A (Investment Logic), 2010-03-03)
📚 Investment Insights
- Hidden assets are the biggest opportunities: Market pricing often looks only at financial reports; invisible assets (unlisted company equity stakes) often represent the greatest value.
- Rough estimation doesn’t need precision: No need to figure out exactly how much Taobao is worth; only need to judge that “no matter what it’s worth, it’s free” — that’s enough.
- The essence of rotation is opportunity cost: Selling NetEase to buy Yahoo, selling Yahoo to buy Apple — each step asks “which one is cheaper?” not “which one will go up?”
🔗 Related Notes
Duan Yongping · Alibaba · Rough Estimation · Discounted Cash Flow · Intrinsic Value · Opportunity Cost · Margin of Safety