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Four Reasons AOL Is A-Okay


Won't be long before it goes from "unwanted" to "gotta have".

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

Mason Slaine is an operator of software and information technology businesses based in New York. Prior to his current role, Mason was the former president and CEO of Thomson Financial Services, Inc and the former president & CEO of Information Holdings Inc. See his previous submission on July 8, 2009, when the Dow was trading near 8100: Why the Dow Could Be at 10,000 By Year's End.

AOL's (AOL-WI) revenues and profits are declining. The company is being given away by its parent because it has given up. It has missed more golden opportunities than any company I can think of. It can't even figure out if its name should be in upper or lower case! (See also, Will AOL Overcome its History or Be Hobbled By It?)

But I love AOL anyway. Here's why:

1. Every financial asset has its price. This one is selling at the equivalent of the next three years cash flow. How would you like to buy a business like that? I know I would.

2. The new management (mostly Google (GOOG) guys) is terrific and already understands that the company is the ultimate destination vehicle. One hundred million unique users a month will become 150 million over the next 12 to18 months and the financial leverage is enormous.

3. Sum of the parts valuation is well over $50 per share (stock is 24.50 as of this writing). Their will be asset sales that will positively surprise people.

4. AOL will turn around faster than the pundits think. Analysts have it sinking through 2012. I think its more like 12 to 18 months before there are tangible results and the company goes from the "unwanted" list to the "gotta have" list.

I own a lot, may buy more.
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Position in AOL

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