Hello MB: define Internet stocks?? longish reply
Wow. That is a hard one. I'd like to hear how Mr. Greenspan would define them.... Generally I would draw the wide gray line somewhere along the lines of the notion that business is now different and the firm plans to use the Internet to carry out 'business' activities either to speculate of future earnings some years off or speculate that some other Internet company will acquire them for scrip that can be salvaged into cash. There are dozens of Internet companies now, and I suspect that in the next year or two there is going to be a $100 billions chunk rationalized out of the holdings of the retail holders of most of the Internet stocks. Roughly the scale of the S&L fiasco of the 80's.
There are too many companies to track. I happened to choose AOL, AMZN, EBAY, NSOL, and YHOO as marker companies to gage the trading in the Internet sector. WCAP is currently my largest short position. The hopefuls of recent months were hoping for a CMGI effect, but have fallen silent recently. WCAP is a closed end fund with around $5/sh in assets. With pricing around $15 today, it looks like it has good bottom room to rationalize, and I believe people have learned WCAP is not wealthy enough to command any inside track to the current Internet IPO juice train. Mr. Wexler views WCAPas an Internet proxy firm, and so far I have not tickled his fancy into shorting. They were a marginal loan company in years prior to the Internet IPO bubble. Because of WCAP's convertible paper (very minor in all their holdings compared to any of the total market caps of the Internet firms), WCAP has large paper gains, some of which have given back more than 60% from their peaks. More than 90% of WCAP's equity is in the Internet IPO certificates. I don't think the Internets are going to bubble up higher in the giga-buck range, e.g., AMZN to 60 or 90 billions. The yen for a profit in the long run is going to erode the incredible Internet bubble over the next couple years, IMO.
I hope that helps. I just noticed yesterday AMZN, and EBAY, as well as WCAP seem to be in a trading spell that correlates highly with RSI extremums and Bollinger bands. BTW, I use some of the TA indicators as summaries of what I gather as my impression of how a stock is trading. To that extent, some of the TA indicators jibe with my impression and I view them as a graphical convenience capturing my sense of things. I do not look at TA to initiate investment thinking; fundamentals and observing trading versus news, time, and thinking from others comes first. I plan to sample spikes-above-Bollinger-bands Internet stocks in minor positions to see if I can pick up a hefty increment in the couple days following such an event, and of course, when RSI is high. I expect it to be good for a couple trades forward, but then things may change and cloud that current view of their trading. I don't expect it to last more than a few cycles. I am very wary of bottom feeling the muck, with the risky specter junk stocks can notch down overnight sufficiently to offset any trading upward, hence the spikes over Bollinger bands only thinking. It would be fun to try a 100 shares of ONE Internet stock sell at a local high and then buy near an apparent low, go short at an apparent top, and cycle back to long at an apparent local bottom. Such play is more trading to see if I could get away with it, than investing. AMZN looks like a possibility short term, possibly EBAY. Any other positions at this time would be local tops only. Play is not a portfolio activity....My sense is that the Internet stocks are coming into a tradeable state, and STRICTLY for trading. The investor is going to maintain a hedged short position in these bubbles.
Please try to ask me simple yes and no questions Mrs. B . Are you testing the waters on the Internet stocks yet? Please share your wisdom and views with us.
Best regards,
m |
