Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Yelp Inc. (NYSE: YELP ) plunged more than 12% Tuesday after a shareholder rights firm launched an investigation into the local business search specialist.
So what: Specifically, Johnson & Weaver LLP is investigating whether Yelp may have violated federal securities laws with misleading statements regarding its "business practices, prospects, and financial condition." The firm says its investigation will center on "the true nature of the reviews appearing on the Company's website, the reliability of the Company's processes and algorithms in screening potentially unreliable reviews, and certain undisclosed business practices including requiring business customers to pay in order to suppress negative reviews."
Now what: While this largely erases last week's gains following Yelp's solid quarterly results, this investigation doesn't guarantee Yelp has actually done anything wrong. What's more, shareholders who weathered Yelp's plunge last month know the allegations aren't anything new. In short, I still don't think long-term investors should be selling Yelp based solely on these short-term concerns. Rather, keep an eye on how Yelp responds to its critics -- if it has nothing to hide and uses this to further improve its processes, shareholders could end up better off in the end.
Are you ready to profit from this $14.4 trillion revolution?
Yelp is trying to make shareholders rich by making the most of a previously untapped market. And let's face it: Every investor wants to get in on revolutionary ideas before they hit it big -- like buying PC maker Dell in the late 1980s, before the consumer computing boom, or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hypergrowth markets. The real trick is to find a small-cap "pure play" and then watch as it grows in explosive fashion within its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 trillion industry. Click here to get the full story in this eye-opening report.