What company has turned $250 million into $100 billion in the past 25 years by focusing mostly on online marketplaces? You might be thinking Amazon, but the company I'm actually referring to is IAC/InterActiveGroup (IAC 4.15%), the interactive media conglomerate long led by media mogul Barry Diller.
Following its spinoff of Match Group last year, IAC -- along with the 10 enterprises it has spun off over its history -- would be worth about $100 billion, according to a recent shareholder letter from the company. This is up from the $250 million that IAC's predecessor, Silver King, was worth when Diller took it over in 1995. That comes out to a compound annual growth rate of 27%, easily besting the S&P 500 historical average return of 9% and even topping Warren Buffett's Berkshire Hathaway, which has compounded at 20% since 1965.
Today, Match Group is worth $43 billion, while Expedia, which IAC spun off in 2005, is valued at $23 billion. IAC itself has a market cap of $23 billion, and the stock is up nearly 150% since it spun off Match Group last June.
Despite its impressive track record, IAC doesn't get the attention that other high-growth stocks enjoy, because it operates as a holding company rather than a singular business. As a result, its profile is consistently changing -- the company is clearly different today than it was a year ago when Match was its biggest holding.
Can IAC keep up this streak? Let's take a look at what the company has to offer and how it got here.
A brief history of IAC
Diller recognized early on that the internet would drive an explosion in interactive commerce, and IAC has historically focused on online "interactive" marketplaces. IAC's most successful spinoffs include online dating company Match Group, online travel company Expedia, and Ticketmaster, the leading online ticketing platform that is now part of LiveNation Entertainment.
Expedia and Match Group, the company's biggest successes, came from rolling up several brands in travel and online dating. In the case of Match, IAC first acquired Match.com in 1999, and then it accumulated a number of other online dating brands over its history.
Other publicly-traded companies that IAC has spun off are HSN, now part of Qurate Retail; Interval Leisure Group, now part of Marriott Vacations Worldwide; and Lending Tree. Expedia later spun off TripAdvisor and Trivago, and publicly-traded ANGI Homeservices (ANGI) is now part of the portfolio after IAC merged HomeAdvisor with Angie's List (IAC retains a majority stake in the company).
With Match no longer part of IAC, the company's biggest holding is now ANGI Homeservices, a company valued a nearly $8 billion in which IAC owns an 83% stake. IAC also recently announced plans to spin off Vimeo, a fast-growing digital video platform and competitor to YouTube. Investors cheered that move, sending the stock soaring, and Vimeo is now valued at $6 billion following a recent equity funding round. In the fourth quarter, Vimeo posted 54% revenue growth, and total subscribers were up 24% year over year.
Today, IAC owns more than 150 brands and products as well as a number of minority investments. ANGI Homeservices, which operates HomeAdvisor, Angie's List, and Handy, is targeting a long-term revenue growth rate of 20%. The company is focused on adding features like a fixed-price platform, a membership (currently in a pilot), and an improved mobile app.
After ANGI, IAC's second-largest segment is search, anchored by Ask.com, a business that posted 9% revenue growth in the recent quarter. IAC also rebranded About.com into DotDash, an umbrella media group that includes content sites like Investopedia and Simply Recipes. In the fourth quarter, DotDash delivered 33% revenue growth.
Finally, revenue more than doubled in the emerging and other segment, which is made up of Care.com, a marketplace to find caregivers such as babysitters or elder care; BlueCrew, an online temp agency focused on blue-collar jobs; and Mosaic Group, a collection of mobile brands.
IAC also sees an opportunity in online gambling with MGM Resorts International, and it took a 12% stake in the company for $1 billion last year. The value of that stake has nearly doubled already.
Altogether, IAC revenue jumped 13% to $3.05 billion in full-year 2020, even as businesses like ANGI faced challenges from the pandemic.
Is IAC a buy?
Though IAC is unlikely to be found on most lists of top growth stocks, the company has developed a reliable formula for creating shareholder value by buying small digital marketplaces, investing in them through acquisitions, technology, and marketing, and then spinning them off when they've become more mature companies.
With promising brands like Care.com and BlueCrew, and a minority stake in Turo, which is something of an Airbnb for cars, IAC has a number of promising growth opportunities. Additionally, the company had $3.7 billion of cash on hand at the end of 2020, making it well positioned for further acquisitions, especially once the Vimeo spinoff is complete.
Its track record of 27% compound annual growth may be difficult to maintain, but IAC still has many of the tools needed to continue outperforming the market, especially given that shifts toward digital platforms have only been accelerated by the pandemic.