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Gulp… AOL Not Kidding Around

February 26th, 2011 19 comments

With my original purchase of AOL sitting at -17%, I can’t help but to be a little nervous about their recent purchase of The Huffington Post.  The $300 million purchase is essentially making an all-or-nothing bet that the CEO knows what he’s doing, and kills the possibility of many smaller acquisitions by the company.

So what am I doing?  I’m following the CEO’s move and buying more.  While he put around $10 million into his company, I think I’m going to go a little lighter than that.  I am however going to triple my current holdings at around $21 per share.  This will lower my average purchase price and also at the same time make it one of my biggest holdings.

In the future, I’m going to set a target at around $15 where I would consider buying more.  If it doesn’t get that low, then I will hang on to what I already own and see what happens.

In the meantime, I’m going to try and mentally prepare myself for another quarter or two of negative results.  The latest acquisition isn’t likely to show any serious impacts to the company’s revenue in the near term and this is mostly factored in at the current stock price.  On the other hand, if by some miracle, revenue and earnings show some serious improvements this stock could very well take off and I would have bought in at the bottom of the curve (this is a long shot though).

Only time will tell…

PS, I’ve fought the urge to leverage up and buy stock options for this one.

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