The last time I wrote about Twilio Inc (NYSE:TWLO) was June 21; I suggested that fans of the cloud-based company who were unsure of TWLO stock, should buy SPDR S&P Internet ETF (NYSEARCA:XWEB) instead.
In the short time since the article went live, Twilio stock is up 4%, while XWEB is up 5.2% over the same period. Round one goes to XWEB.
InvestorPlace contributor Richard Saintvilus, who has a real knack for picking winners, suggested about a week after my article ran that TWLO stock could rise by almost 40% by the time next summer rolls around.
That’s not a bad return for one-year’s work, even for the technology sector. However, anytime you invest in high-growth companies with little or no profitability, you’re taking a huge leap of faith that its business model is sound and it’s moving in the right direction.
As we saw in May, losing a big customer like Uber does not sit well with investors which knocked TWLO stock for a 26% decline.
A Second Alternative
The first alternative, my suggestion to buy XWEB, is still the best way to go if you want to bet on the internet space. But, it’s not the only one.
Rather than only buying Twilio, you might consider buying three other stocks from the XWEB portfolio in addition to TWLO, preferably ones that make money. That reduces the company risk that you get by flying solo with Twilio.
Who to buy? Here are my three best options:
Internet Stocks to Buy: IAC/InterActive (IAC)
Barry Diller, founder, and chairman of IAC/InterActiveCorp (NASDAQ:IAC), is a very underrated chief executive and allocator of capital.
Over the years Diller has created tremendous value for shareholders with his razzle-dazzle style of buying, selling and spinning off internet assets. The most recent example being the purchase of Angie’s List Inc (NASDAQ:ANGI) to merge with IAC’s Home Advisor business, which will operate as a separate public company.
Since Diller changed the company name to IAC/Interactive on July 14, 2004, IAC stock’s up 262.3% on a cumulative basis through July 12 compared to 122.8% for the S&P 500 and that doesn’t include the value of the existing spinoffs that are public companies.
However, in June, I recommended that IAC shareholders sell their stock because it’s already gained 64% year-to-date and is due to cool off.
My suggestion is to buy a half position now and wait to purchase a second piece later in the year should it drop back into the $70s where it spent most of the first four months of 2017.
Internet Stocks to Buy: eBay Inc (EBAY)
With all the excitement surrounding everything that Jeff Bezos does at Amazon.com, Inc. (NASDAQ:AMZN), it’s easy to forget that eBay Inc (NASDAQ:EBAY) still exists, let alone the fact it is now one of the biggest tech stock value plays anywhere.
However, with all the work it’s doing regarding artificial intelligence and its e-commerce business, its 2018 forward price-to-earnings of 17 times earnings seems incredibly cheap.
“Ebay is a rare value story. … While eBay remains a turnaround story, marketplace growth is stable and has the potential to accelerate in 2H17/2018, driven by platform changes and product innovation,” Paul Bieber wrote in a June note to clients. “[It’s] an internet value story with several paths to value creation.”
Internet Stocks to Buy: Facebook (FB)
I thought about using Amazon with my third pick because it’s a stock I like. However, when push comes to shove, I want the third one to be the anchor for this foursome; Facebook Inc (NASDAQ:FB) fits the bill.
InvestorPlace contributor Vince Martin recently called Facebook the only social media stock that matters. He rhymed off a bunch of reasons why FB stock is a must-own including the fact its valuation after the latest tech correction is very reasonable.
Like Amazon, I think Facebook is worth owning for the long haul. In fact, if you only have enough money to buy TWLO and one of the three stocks I’ve mentioned here, the second one has got to be Facebook.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.