I forgot where I read it, but many pure internet funds are no longer true internet funds at all. They are starting to incorporating the likes of CSCO, MSFT, LU, etc. into their funds. Granted that these companies are still associated w/ the internet and that you can't pour all your money in illiquid net stocks, but I believe this is something to take into consideration.
Those are the companies that will truly benefit from the internet in the long term - 5 to 10 years. YHOO, NTBK, etc. soon enough their growth will stagnate. When this happens, the stock always comes into par w/ the true value of a stock. Right now these stocks are being valued on their hypergrowth which you cant really put a PE or PSR on. But when their growth returns to a "mere" 40% annually, people will start to look at their quarterly/annual revenues which is squat compared to their billions in market cap.
I wouldn't be in the least surprised to see managers like Ryan Jacobs either begin to add even more of the larger cap stocks to their "net portfolio", or just retire from the fund altogether. Their is nothing like leaving at the top. And you have to question whether or not these funds will be able to return triple digit returns. They may still beat the market, but these funds also incur a substantial amount of risk also.
One side note - someone mentioned bubbles - ie. '96 wonders like IOM, etc. The one that sticks in my mind is the Y2K bubble. Every stock as you remember that had potential to steal a piece of the pie, and this was a $600 billion pie, was bid up parabolically. After all if you could just capture 0.1% of the market, you would be looking at a $600 million company at least. They weren't wrong about the market. Every respectable company to date has allocated millions to Y2K. What they were wrong about were the stocks. Virtually none of them are even known today. They didn'd perform for one reason or another. The correlation is that the internet may grow so and so hundred percent in the next years - this may even be conservative, but will so and so company truly benefit from the growth and will it survive when the growth rate slows as it inevitably will? |
