Sometimes, all it takes is simple arithmetic to spot real value in the stock market, Jim Cramer told viewers of his "Mad Money" program Tuesday night, and that's the case with long-time Cramer favorite IAC/InterActive (IAC) .
Shares of IAC are up 38% for the year, but that number doesn't tell the whole story. That's because the company owns stakes in both Match (MTCH) and ANGI Homeservices (ANGI) , two business units the company spun off in recent years.
Adding up the combined value of all three companies, investors have gained 270% in just the past five years.
So how does the math add up? IAC's stake in MTCH is valued at $18.7 billion. Its stake in ANGI, $3.5 billion. But IAC's current valuation is just $21.3 billion and that's not even taking into account its $1 billion in cash.
Cramer said buying shares of IAC is a no-brainer. The company's remaining brands, including Ask.com, Dictionary.com, Vimeo, Turo and more all represent incredible value and should certainly be valued a lot more than zero.
Let's check out the charts and indicators to see what they might be projecting.
In this daily bar chart of IAC, below, we can see a mixed picture with the chart and the indicators. Prices declined in the fourth quarter of 2018 and bottomed in November and December. Prices rose into August ignoring the broad market weakness in July. IAC is above the rising 50-day and the 200-day moving averages but the On-Balance-Volume (OBV) line shows a decline from early May. A declining OBV line happens when the trading volume is heavier on days when the stock closes lower. Heavier volume on a down day is a sign that investors and traders are anxious to "get out" of longs. The Moving Average Convergence Divergence (MACD) oscillator is above the zero-line and is poised to move up or down with the price action ahead.
In this weekly bar chart of IAC, below, we can see an impressive rise the past three years. The rising 40-week moving average line has done a great job identifying the uptrend as well as buying opportunities. Trading volume has been declining the past 12 months and the weekly OBV line has not moved higher with prices and represents a long-term bearish divergence. The MACD oscillator just turned higher for a fresh buy signal.
In this Point and Figure chart of IAC, below, we only look at price and ignore things like volume and time. This chart is projecting a possible downside price target of $205. A decline to $205, should it happen, would break all of our popular moving averages.
Bottom line strategy: Prices are still in an uptrend, but the OBV line has been diverging from price for four months, so I want to be cautious with new positions.