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Technology Stocks : America On-Line: will it survive ...?
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To: Jason Cogan who wrote (9054)3/26/1998 10:34:00 AM
From: Todd Daniels  Read Replies (1) of 13594
 
Jason,

Your replay of Street thinking about AOL is spot on.
There's even more fundamental factors at work
(apart from the notorious trading dynamic).

- AOL and YHOO are the only Internet stocks of institutional
size. Unless a fund is small or focused on microcaps, if it
wants representation in the 'Internet sector' it has to own
one or both.

- "..foolish to think you're better than the market."
Indeed, too much knowledge can be dangerous. It's amazing the
number of portfolio managers who buy AOL but whose exposure
to even personal use of the Internet ranges from non-existent
to neophyte -- and then is limited to AOL. Many are still
wedded to fax. They buy mainly on broad notions such as
"market leader in expanding industry".

I won't even get into the BS of analysts, except to note their
telling failure to downgrade on price basis when AOL slices
through or nears 12-18 month targets set only weeks earlier --
and often instead find excuses to raise the target, even
without raising EPS or growth estimates. Only Merrill has
demonstrated integrity to the discipline.

Then there's the media. I've never seen such lack of balance
as in coverage of AOL. Complete gush. Led around by the nose.
Every negative is downplayed or ignored -- unless it's so basic,
big, and apparent that it can't be; in which case the coverage
is as unbalanced in the negative direction.

And no one seems to consider implication of the unparalleled
relentlesness of AOL's PR -- and the lengths they go to for it.
It wasn't an accident that the Fortune cover story issue hit the
stands on the ex-date of the stock split. Ditto nomination of
Case to NYSE board. (With distinction of only company so
honored that has junk grade bond and bank credit rating (S&P BB-)
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