There is never a dull moment when you talk markets, economics, and stocks over coffee ! Last month, I drove up to SF downtown to meet a good friend of mine who is one of the smartest tech analysts out there. The same guy whose insights I have tweeted before on companies such as Nimble, ServiceNow, Oracle etc. This time, we had a great conversation about YELP.

As you all know, I have been adding to $YELP big time after the recent pullback for a long-term trade. It is a big #BottomPlay position in my portfolio after JIVE and TWTR.

I spent a lot of time Jan/Feb studying $YELP. Putting aside from all the “theoretical” bullshit thesis & documentaries you hear on their business practices, my “factual” thesis is straightforward –>

Back when YELP IPOed, it was a shaky story with Google & Facebook being its biggest threats. Google had launched Google+ platform and had an opportunity integrating it with Goole Reviews along with Google Maps. This to me was one of the biggest threat to YELP and I stayed away from the stock. There was also a lot of paranoia surrounding Facebook launching a Review service. Fast forward 2015, Google+ is a disaster, Google Reviews looks like a ghost town. Facebook reviews came but quickly became an un-searchable, tab hidden inside a Company/Business Page. Facebook has its own use case and Yelp has it own. Yelp and its user base continued to gain strong traction beating out both Google and Facebook.

The bears will quickly point to the recent slowdown which was caused by Google’s search tweaks. I certainly think this impact is temporary because many people still use Google Search to get to their information including YELP. YELP has confirmed that most of their traffic currently comes from Google. But as mobile markets including wearables grow larger and larger, there will be a higher dependence on niche Apps vs. today’s dependence on generalized search engines. Markets adapt fast and it will not take much time for the markets to swing in favor of niche apps which specialize in user’s needs rather than generalized search engines like Google.

In all honesty, there is nothing too complicated about the YELP story – Strong IP, huge TAM, market leader w/ weak competition, large international market growth opportunity. If one of the larger competitor becomes a threat, other larger competitor will have no problem buying YELP for pocket change. And I do acknowledge the possibility of YELP shares remaining weak in the short-term including upcoming results given the impact of Google tweaks, but in the long term, it is a strong buy.

And now back to my coffee table discussion. Back in Feb when I initiated my position, YELP had not announced their acquisition of Eat24. Thus, my thesis did not include the TAM (Total Addressable Market) from the Food Takeout business. My friend simply asked me to go home and start reading up on GrubHub ($GRUB). I went home that night and pulled out all their recent public documents and filings and I was pretty stunned at the opportunity ahead. If you are a YELP long, I will give you the same advice my friend did and you can start with this:

http://investors.grubhub.com/files/doc_presentations/2014/GrubHub%20Investor%20Deck%20June%202014.pdf

DISCLOSURE: Long YELP

DISCLAIMER: The above is my opinion intended for informational purpose only and should not be used as professional financial advice. The above is not a recommendation to buy, sell, or short stocks or options. By reading the above text, you agree that any trades or investments you make are solely your responsibility. I cannot assure you that the above information is accurate. Trading stocks or options can be risky. Any profits, losses, or break even are solely your responsibility. Please consult a certified professional before buying or selling any such stocks or options.

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