How to Cash In on the Match.com IPO

Every so often, in sharing a story about a "Disruptor" catalyst making waves around us, I'll recommend a story-related stock.

One recent example was IAC/InterActiveCorp (Nasdaq: IACI), which I recommended in my June 12 report, "Today We're Going to 'Fix You Up' With a Winner."

It's only been two weeks, but IAC is already following my storyline.

match.com ipoOf course I was trying to be funny with the "Fix You Up" reference in the title, as the story was about online dating in general. But I was quite serious in predicting that Barry Diller's IAC/InterActiveCorp would spin off its Match Group of properties into a separate company and issue shares to existing IAC stockholders.

Well, it didn't take long. Sure enough, last week IAC said it was going to do just that, and spin off the Match Group into a separate company. In a statement, IAC said that it expects Match Group to issue close to 20% of its shares in the IPO.

In my report, I accompanied my recommendation with a specific "Buy" strategy.

I still like the company, but today's markets are fluid - meaning the strategy I detailed needs refining.

Today, I'm going to do just that. And you don't want to ignore it...

After all, online dating is a $2 billion business...

A "Golden" Game Plan

At the time I penned my report - on account of the market wobbling a bit - I recommended buying IAC, but trying to get it lower if the market dipped and took IAC down with it. In a perfect world, the market would have dipped and IAC would have gone down to the $70 level, where I said to buy it, and then gone lower to $65, where I said you should buy more.

But it's not a perfect world - which is actually a good thing since it means the overall market didn't tank (at least for now). So we didn't get to load up on IAC at a level much lower than where it was trading when I made the recommendation.

Even so, I'm betting at least some of you folks bought some shares that day - especially since I concluded by saying: "The only thing is, if you wait to pick up shares a lot lower, you may not get a chance. The market could climb the current 'Wall of Worry' and go a lot higher before it eventually 'corrects.' Barring a Match Group spin-off, smartly buying IAC shares and adding to your position on dips could be a great way for you to fall in love with online dating. And if that happens, just remember: We were the matchmaker that 'fixed you up' with this big-profit Disruptor."

If you listened - and acted - you're at least a little in love this week.

If you waited until the end of the day (June 12) and bought IAC, you'd own the shares at roughly $75.93. It made a new high of $82.40 last week and closed at $80.48.

So here's what you should do now...

If you bought IAC shares, hold onto them to get the Match shares when that company is spun off.

Whether you bought IAC shares or not, I recommend buying more shares (or opening a new position) if IAC dips to $77. I'd buy more if it dips to $75, or $70, and I'd definitely be buying more shares if the stock drops to $65.

On a position that I like, I view "averaging down" like this: By accumulating shares at lower prices, I'm bringing down my average cost. What I do then is take my average cost and figure out from there how much I'm willing to lose - and not cry - if the trade goes against me.

In the case of IAC, I'd get out of my shares if the stock falls below $60. It shouldn't go down there. If it does, something's really wrong, and I'd take my loss and move on.

Sure, I'd cry a little. I'm pretty good at making money - and I hate losing it.

I don't expect IAC to dip anywhere near that low on its own. But if the market takes a dive on account of Greece defaulting - which is still a possibility - then all stocks could take a hit.

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But just because they take a hit doesn't mean they won't rebound.

And IAC/InterActiveCorp is one of those shares that - over the long haul - I believe will rebound... a lot.

During that same long-run time frame, a "cheap" (low stock price) date with IAC/InterActiveCorp and Match Group will turn into a meaningful relationship.

We started today's visit by talking about "stories." And the scenario I've sketched out for you today will turn into one of those "how we met" tales that will be retold over and over again at family gatherings... for years to come.

One day, in fact, you'll be telling this story at your "Golden Anniversary"... literally.

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About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

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