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Strategies & Market Trends : The New Economy and its Winners
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To: Eric Wells who wrote (382)5/22/2000 11:49:00 AM
From: Wizard  Read Replies (1) of 57684
 
Eric,

>>But I think the truth is coming to light that forecasts of profits of internet firms have been greatly exaggerated.

I don't disagree with you regarding many of the 'internet firms' you refer to. However, I believe I am invested in the firms where profits are entirely understated, the opposite of exaggerated. I will likely be wrong about a few but when you are right in technology stocks, it can be very rewarding.

It comes down to your conviction in the oppotunity and in the management team to execute. In Q1, many core infrastructure holdings printed numbers that wouldn't be possible in anything but the early stages of a massive build-out.

Regarding risk, that is why you diversify. There are 2 pieces to risk, volatility associated with the stock and business specific risk associated with the firm. The latter piece of risk can be diversified away. Its portfolio theory 101. So volatility is the risk. We know these stocks are going to be volatile. We know they are going to overshoot both ways. We might be going lower as a market from here, perhaps significantly. What I am saying is that it pays over the long run to average-into the best whenever they drop by a significant percentage. Don't leverage yourself too much so you can take the long-term view. If you absolutely need the money in the next year or two - don't buy equities.

The internet is not about selling Barbecues at BBQ.com (recently out of business). Its about the business process reengineering associated with a networked economy.
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