Guys, I was thinking this afternoon while I was at church and a movie. (Went to A SIMPLE PLAN - not great).
Why was Alan Greenspan positive about the internet when questioned Thursday? Why, indeed, are the valuations rising to such levels? Why would Alan Greespan have said, "The increasing shift in retail sales away from stores to the Web is creating a huge market for Internet firms," instead of taking the opportunity to "save" us internet investors.
What firms could he have meant? Which firms will do well? Well, let's consider a case in point, let's say... Perfumania. And let's look at Amazon, too.
First, let's look at why Amazon, even with its huge valuation and revenue growth, is having some trouble on the profit (not revenue) front.
Amazon is in a low-margin business, and started from scratch in building a distribution system. It's been expensive for them, even with all the books they've sold. And what if they tried to expand revenues and sell in foreign countries? Will they have to stock, say, MOBY DICK :-) in hundreds of different languages? What sort of inventory and distribution system expenses would they incur if they tried to go global?
Now let's look at Perfumania. (I hope you don't mind that I use this as our example of a company that could become hugely profitable while selling over the internet.)
Perfumania can use its existing name brand recognition for easy internet access, they can use their existing superb distribution system, they CAN SELL TO EVERY WIRED COUNTRY AND EMIRATE ON EARTH - without incurring any product/language/culture barrier expense - and all of this, folks, in a HIGH-MARGIN business.
All I have to say is... I'm glad that I'm long, not short, this stock. And to the shorts, I say - yes, I'll sell some on a spike, but I'M HOLDING SOME LONG TERM. THIS COMPANY HAS EVERYTHING GOING FOR IT TO MAKE IT A HUGE SUCCESS ON THE INTERNET. To repeat, since I'm off to watch the Super Bowl and am not posting again:
Perfumania has what it takes to increase revenue growth and become very profitable as they expand their internet presence. And that's what I look for in MY internet stocks. |
