ACOM Ancestry.Com Inc. (MM)

Many investors play the "what if" game.

What if ... you had bought Walmart shares in 1980?

What if ... you had added Apple to your portfolio in 2002?

What if ... you had bought almost any stock on March 9, 2009 - which was the Great Recession low- and which then soared?

What if... what if... what if.

It's easy to look at the past and think you've missed out on an opportunity that will never come around again. There is only one Apple, after all. But what if similar opportunities were staring you in the face right now? Would you be open to seeing them and ready to act?

The Internet Is On Sale

The Internet stocks have always had an air of glamour about them. Remember toys.com or pets.com from the 1990s? Neither one survived the dot-com bust, but that didn't stop investors from falling in love with the idea of a company operating solely off the Internet.

The new crop of Internet stocks, however, have one thing that the dot-com era ones didn't have and that is profits. Today's crop of companies actually makes money. In fact, they make lots of it.

In the last year, many of the favorite Internet stocks started rallying. Many of them double or tripled in value.

Some were saying that it was the dot-com boom all over again. P/E ratios soared to nosebleed levels, in some cases companies were trading at 100x estimates or higher.

And then August happened.

What was once "hot" turned "cold" and the stocks went into a free fall as investors dumped everything that they had profit in.

Now's Your Chance

Some of the Internet stocks are down 30% to 80% off their recent highs. You read that right. They are on sale! Yet the earnings growth potential remains intact.

With the recent sell off, you can get these hot Internet stocks for a fraction of what they were selling for just a few months ago.

4 Hot Internet Stocks Now on Sale

1. Travelzoo
2. OpenTable
3. Netflix
4. Ancestry.com

Travelzoo Inc. (TZOO)

Expected 2011 Earnings Growth: 68%
Expected 2012 Earnings Growth: 31%

Travelzoo is a global Internet media company that has 24 million subscribers worldwide. You might know them for their weekly "Travelzoo Top 20" travel and entertainment deals. The company publishes deals from 2000 partners.

Shares were on fire earlier this year, hitting a multi-year high. The forward P/E got as high as 58x before it all came crashing back to earth in the summer sell-off.

Shares have fallen about 65% in the last 3 months.

Even with the recent big sell-off, this Zacks #3 Rank (hold) is still up 13.5% on the year, compared to the Russell 2000, the small cap index, which is up just 0.6% in that same time.

But Travelzoo now trades with a much more respectable forward P/E of 22x. While no one would call that a value stock, compared to just a few months ago, that's a bargain. It's also the cheapest the stock has been on a P/E basis since 2008.

OpenTable, Inc. (OPEN)

Expected 2011 Earnings Growth: 53%
Expected 2012 Earnings Growth: 53%

OpenTable provides free online restaurant reservations and reservation management solutions for restaurants. It has more than 20,000 restaurant customers around the world.

This Zacks #1 Rank (strong buy) hit a multi-year high in the spring and had a sky-high forward P/E of 124.

As you might expect, the summer sell-off hit the shares hard. They're down 35.6% in the last 3 months.

The stock has underperformed compared to the Russell 2000 small cap index over the last year. It has lost 21% compared to the Russell gaining 0.6%.

While the shares are still trading with a forward P/E of 48, that is the cheapest the stock has been since it went public in 2009. Back then, it had a P/E of 158.

Netflix, Inc. (NFLX)

Expected 2011 Earnings Growth: 49%
Expected 2012 Earnings Growth: 45%

Netflix provides Internet subscription services for movies and TV shows for 25 million subscribers in the United States, Canada and Latin America. The company has recently been in the news for its decision (since reversed) to split into a streaming only and DVD subscription service.

After shares hit multi-year highs early this year, investors sold off the shares all summer on worries over content and the raising of prices. The chaos surrounding the decision to split into two only added to the selling.

Shares fell 60% in the last 3 months.

Shares have taken a dive in the last year as compared to the S&P 400 mid cap index. The mid caps have managed a gain of 3% in that time while Netflix is down 24.8%.

At their peak this year, shares traded at 60x forward estimates. After the sell-off, they're now trading at just 26x. That is the cheapest this Zacks #3 Rank (hold) has been since the financial crisis in 2009.

Ancestry.com Inc. (ACOM)

Expected 2011 Earnings Growth: 56.4%
Expected 2012 Earnings Growth: 30.1%

Ancestry.com is one of the few Internet companies that dares to have ".com" in it its actual name. The company operates the world's largest online family history resource, where its 1.7 million subscribers have access to 7 billion records. Customers can also create online family trees.

Like the other Internet companies profiled here, Ancestry.com hit multi-year highs this summer before being crushed in the August sell-off.

Shares lost 44% in the last 3 months alone.

For the year, Ancestry.com has underperformed the Russell 2000 small cap index. It has lost 3.8% and the Russell is up 0.6%.

But, with the stock sell-off, has come more attractive valuations. Shares traded as high as 39x forward estimates this year before the sell-off.

Ancestry.com now has a forward P/E of 20.5. That is the cheapest this Zacks #3 Rank (hold) has been since its 2009 IPO when it had a P/E of 20.2.

Recognizing Opportunity

If you liked these 4 Internet stocks over the summer, what's not to like about them now? They have gone on sale.

Don't be a "what if" investor. Opportunity is always knocking in investing but it all starts when you open the door.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

 
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