What Is Altaba Inc. Up To?

Markets Motley Fool

Altaba (NASDAQ: AABA) just published an update on the focused investing company's financial health. The company formerly known as Yahoo! is a very different beast since it sold its operations to Verizon (NYSE: VZ) and refocused on the management of a few investments overseas.

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The company owns 14.7% of China-based e-commerce giant Alibaba (NYSE: BABA) and a 35% stake in former subsidiary Yahoo Japan, an online search and marketing service in the land of the rising sun. How have these core investments treated Altaba since the July update?

Let's have a look.

By the numbers

Investment

Fair Value as of Sept. 30, 2017

Fair Value as of June 16, 2017

Change

Alibaba

$66.2 billion

$51.8 million

28%

Yahoo Japan

$9.6 billion

$8.7 billion

10%

Total Altaba Investments

$84.8 billion

$74.2 billion

14%

Beyond the two flagship holdings, Altaba holds $5.5 billion of corporate bonds, $1.6 billion in certificates of deposit, and another $1.2 billion in an assortment of smaller investments. The Excalibur IP operation, which holds the licensing rights to Yahoo!'s portfolio of technology patents, did not move over to Verizon, and accounts for $675 million of Altaba's asset value today.

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But 78% of Altaba's total investment portfolio consists of Alibaba shares. Alibaba's stock has gained 39% since Altaba was formed, and Altaba shares followed along with a 37% gain. Over the same period, Yahoo Japan offered a 5% return, and the S&P 500 index gained 6%.

In other news:

Altaba is not a very active trader. The company has neither sold not bought a single share of Alibaba or Yahoo Japan in its (admittedly short) history, and also leaves most of its smaller holdings untouched. The company did unload a $69.3 million stake in Snap (NYSE: SNAP) in September, but that's  a rounding error next to its pair of multibillion-dollar holdings.

As always, Altaba shares are trading roughly 30% below the combined value of its investment assets. As my fellow Fool Frank DiPietro has explained, that's due to the tax costs that would be involved in moving those international funds back to American soil. If Altaba ever finds a way to wind down its Asian assets without triggering a large payment to Uncle Sam, share values should rise closer to the firm's net assets value.

Under a $5 billion share repurchase program, Altaba has bought back $3.3 billion of its own shares as of Nov. 16. The program is sure to be reapproved with a new multibillion dollar target, since Altaba has promised to return all its cash and holdings to shareholders over time.

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Anders Bylund owns shares of Alibaba. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends Altaba Inc. The Motley Fool has a disclosure policy.