TheStreet.com
Cramer's view on incubator stocks
By James J. Cramer 12/13/1999
Remember in the movie "The Invasion of the Body Snatchers," the giant incubating pods that started popping up everywhere? That's what's about to happen with the stock market now that we see what multiple "investors" are willing to pay for Internet Capital (ICGE) and CMGI (CMGI).
There was a time when these two wouldn't even have been considered public companies. They actually appear to be more like heavily-motivated-to-succeed mutual funds than true incubators. I know that in our work with Flatiron Partners -- the brainy, relentless venture capitalists based in New York -- you could have an incubator worth at least as much as the two current ones, if only they wanted to! (Disclosure: Flatiron Partners owns a stake in TheStreet.com (TSCM).) And I don't blame them if they don't because being public can often interfere with doing your job well.
But Wall Street doesn't care much about that. So look for a whole new group of incubators to be spun off or created by the same people who bring you all of their other deals. I saw one this week, in a report about Scient> (SCNT), the Web consultant and red-hot stock/B2B stock. An analyst commented that Scient, which has been at the forefront of making great sites, is now going to take positions in the companies it helps. That makes all the sense in the world. It should insist at least on warrants for everything it does.
The new incubator formula that got attention this week was from Primedia (PRM), the outfit that puts out a host of trade publications and New York magazine. After basically fighting the Web with all its might when I worked for New York (you wouldn't have believed in 1996 the stuff that Kurt Andersen and I wanted to do with them and the Web and how they all laughed at us), Primedia, under Tom Rodgers, late of NBC, has hit upon a winning formula. He wants to take stakes in the dot-coms that want to advertise in his trades. This is brilliant. They have enough titles that virtually every dot-com should be dealing with Primedia. He will rapidly increase the value of this equity if he executes the strategy right.
So, now we have to pay close attention to the companies willing to receive something more creative than cash when they work in the dot-com world. The sheer wealth creation that CMGI and ICGE have given us means that the next incubator will make those who spot it early a ton of money.
As always, a lot of ways to win.
Random musings: Me hustling for us. You want to thank us for helping you make money? We greatly appreciate it, and we suggest, in turn, that you buy gift subscriptions for friends to spread the good news. That's the best way I know of showing thanks. Those of you who can't get enough stock market action might want to start setting your dial to Fox News Channel's "Fox & Friends" on Friday morning from 7:15 to 8 a.m. That's because I do a "buy, sell, hold" show like you wouldn't believe, where we take calls and try to cover as many stocks as possible. The folks who run that show are more into the stock market than anybody I have come across in the "nonfinancial T.V." space and they bring out the best -- and wackiest -- of what I have to offer. Or you can stick with your regularly scheduled programming and get a lot of weather and news that won't make you a dime.
Another random musing: As someone who has at times dominated the Badlands, I've done my own fair share of warning people to steer clear of after-hours markets. But I have to emphasize that in the last months, after-hours trading has become as intelligent and as rational as daytime trading. The period immediately following the closing bell has become much more liquid. The two-way markets have become logical and deep.
For the longest time this was not the case. You could make money with your eyes closed as a professional. This article, while certainly correct about the overnight markets, shouldn't scare people from trading during that couple of hours after the bell because those markets are roaring with accuracy.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. Cramer's fund may be long or short certain stocks in his B2B rotisserie league or Red Hot index. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at jjcletters@thestreet.com.
¸ 1999 TheStreet.com, All Rights Reserved.
The post above was cut and past from the MSFT investor site. |
