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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Bill Wexler who wrote (2784)2/13/1998 7:51:00 AM
From: Pancho Villa  Read Replies (2) of 18691
 
>>I think AOL should no longer be shorted. << (sorry about all the typos no time to spell check)

You may be right. but IMO more for reasons that have to do with momentum/crowd investors. AOL is now [at least until yesterday!] a hot stock.

>>. I really believe that there is a fundamental shift occurring....and AOL - in its own way - is developing a monopoly.<<

Growth potetial in this unnatractive business [form the point of view of margins] is huge and they are the market leaders. A couple of observations on them becoming a monopoly though:

1. They are not the low cost provider.

2. The do have some competitive advantage in content [for some computer illiterate people - most people out there?], however this gets offset by their extremelly poor service and the fact that people are getting very annoied by the pop up adds [I have not seen them myself].

3. Barriers to entry are low. The number of competitors is significant. MSTF may wake up and start pushing behind MSN. The long distance carriers may use Internet Service as a hook for long distance customers.

Regards,

Pancho

In addition to high potential, new markets are ussually characterized by high margins, few competitors, and frequently barriers to entry such as capital and/or technology. IMO this is not the case here.
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