This is encouraging.
cbs.marketwatch.com
If the small cap fits, then wear it
Mini stocks may begin to grow again soon
By Thom Calandra, CBS MarketWatch.com
Last Update: 5:44 AM ET Jun 16, 2000
NewsWatch
Latest headlines
LONDON (FTMW) -- Small stocks in the United States and Europe
appear poised for a powerful comeback.
Several measures, including the Russell 2000
Index in the U.S. and the FTSE Small Cap Index
in London, have risen 10 percent and 5 percent
respectively from lows they touched May 24. For
the past 30 days, the two indexes, which
represent the best and brightest of their countries?
small companies, are neck-and-neck: up 5
percent. (See charts at right.)
Such gains, given these indexes? steep falls since
March, are manna from heaven. Investors, stock
brokers and especially, small-cap executives, are
all dreaming about a return to the good times of
1999 and early 2000. The worldwide focus is on that group of companies
hit hardest this year: Internet businesses. (See related story.)
Small-cap executives are going on record with forecasts of better days
ahead.
?Internet stocks will get better once the group starts to achieve
profitability,? chief operating officer Dean Daniels of Web publisher
theglobe.com (TGLO: news, msgs) told me this week in his New York
City office.
?I have no doubt investors will come round to emerging businesses once
they prove they can operate as self-financed companies,? said Peter
Agertoft, CEO of Futuremedia PLC (FMDAY: news, msgs), a
London-area online content company.
What?s the central reason the world?s smallest companies, especially
those in the technology arena, are poised for a powerful summer rally? It?s
the wall-of-cash theory. Central banks around the globe have been
expanding their money supplies at a record pace for three years now.
Plus, investors are spoiled. Equity markets generated more than $5 trillion
of profits for the world?s fund managers in 1999. (See related column.)
Windfall city
A lot of the equity windfall came from tech stocks. Investors are spoiled
and greedy. They?re searching for the potent returns they saw last winter.
Small company shares in the U.S. -- those valued at between $200 million
and $1.5 billion -- rose 50 percent in the whirlwind rally that started in
November and ended abruptly in mid-March. The gain for British
small-caps, as they are called, was about 38 percent during the same
span. The Russell 2000 in the U.S., by the way, holds 2,000 stocks, and
its members will change July 1.
The FTSE Small-Cap Index, many of whose members, like 365 Corp.
(UK:TSF: news, msgs)and Vocalis Group (UK:VOC: news, msgs) were
hit hard in this spring?s tech tumble, holds about 437 companies. Both
indexes have seen their rosters shaken up. Many Internet-related stocks
on both sides of the Atlantic, like theglobe.com in New York and 365
Corp. and Vocalis in London, have been booted from larger indexes
because of their falling market caps.
Still, Internet and other small company executives are coming out of the
woodwork, saying that they are delivering on their prospectuses? original
promises.
?The financial markets are going to be very
surprised to see what exists under the hood of a
to-date $15 million small-cap company,? Adam
Epstein, CEO of e-mail services company
Superus Holdings Inc. (SPRS: news, msgs) of
San Francisco, tells me. Superus, also known as
electronic parts maker Surge Components, is a
tiny company that is developing e-mail and other online networks in Latin
America.
?We?re the only U.S. public company that is developing the Internet
superstructure for businesses in emerging economies, with a pan-regional
network of profitable technology companies,? Epstein said.
That kind of confidence is catchy and could inspire investors.
At theglobe.com in downtown Manhattan, Daniels, the chief operating
officer, says tiny companies such as his, their stocks deflated beyond
belief, can breathe a sigh of relief.
?The idea of the bubble bursting is what we faced 18 months ago,?
Daniels said. Around him, theglobe.com employees went about their
work. The company?s IPO two years ago was one of the most publicized
of the Internet era.
?This company has been around or six years. We?ve had good sequential
revenue growth. We know what our plan is,? said theglobe.com?s
Daniels.
Investors, start your engines. (We?ll report more on theglobe.com and
Internet stocks next week on our MarketWatch.com television show:
?CBS MarketWatch Weekend.? This week, across U.S. television
stations, I will take a look at tiny sex-drug developer NexMed Inc.)
Thom Calandra is editor of FTMarketWatch and CBS
MarketWatch.com. |
