Thoughts...
Heard on CNBC that this was worst week on NASDAQ since August 98
so if your doing ok at this point take heart :)
2nd thought: The influx of new internet issues the past 2 months is going to cause some problems. Namely, for the past year you had a growing supply of money (more and more daytraders/investors) chasing a rather fixed supply (perhaps 20 or so big internet issues)
However, as each week passes we have on average 2-6 new internet stocks... each taking up some capital from investors/traders. I can tell from the suggestions on the board... and how my spreadsheet grows even though I excempt quite a few stocks (such as XCIT or SEEK)
Now the question is, which is growing faster.. the rate of new investors willing to chase internet stocks, or the supply of internet stock shares themselves? (5 internet IPOs a week? Can us lowly investors who drive these internet issues keep up?)
The main advantage we (as investors/traders) have had the past year has been the fact there has been a rather fixed supply of internet stocks to chase. However, this has increased slowly in 1998, and in the past 2 months rapidly increased as any co. with an internet tie rushes to market. This could lead to some sort of saturation point. Yes, not all these new companies are good companies, but they all do siphon off supply of dollars (traders/investors money) ... also some are quite good and deserve to be invested in (such as stephen's TUTS)
Secondly, people are chasing these sort of stocks for big gains... quickly. The past few weeks I've noticed the $200+ stocks (with the exception of EBAY) have had a hard time moving upwards... because its easier to get a 40% gain on a $50 or even a $100 internet stock than a $250 or $300 stock. (also this is why people are chasing $4 online brokerage stocks)
Also, those stocks with bigger floats (greater than 20M) are getting harder to move ... and require hedge funds or other institutions to get involved. So each and every split, reduces the chance of big gains quickly.
SO what does it mean? No idea.. just blabbing about some ideas and perceptions in my head. However, I do think I need to stick to my ideas when I post them (i.e. should of stayed in ABOV based on initial reasoning the past 2-3 weeks; should of bought CNET like I told myself to do) Why these sort of picks? They are "undervalued" in comparison to their peers in terms of market cap... they have small floats, they are not $250+ stocks. So they beat most of the weaknesses outlined above. On the flipside, I did buy the biggest loser of the week (BCST) :) and it also fulfills all these conditions (small float, sub-$200 stock).. but its market cap is quite high...
Don't take this as bearish stance on internet stocks... not at all; this is fasting growest segment in our lives and in our portfolios. Just need to be a bit choosier nowadays... the leaders (YHOO, AMZN, etc) are seen as overvalued by Wall Street... and for those with such high floats... only institutions can move them... so they might be in between a rock and a hard place... and if they dont return the typical 400% in a year, believe it or not, people may grow disenchanted with them to a point...
Anyways, if you care to comment.. throw some comments this way.
Have a good weekend,
Mark |
