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Technology Stocks : America On-Line: will it survive ...?
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To: steve lipson who wrote (8251)2/25/1998 12:09:00 PM
From: Pancho Villa   of 13594
 
>>Pancho, you may have missed the forest for the trees.<<

Point taken. I will try to keep my eyes open. However, most of what we have seen in the way of the recent price move on AOL is based on especulation [which may indeed be right] of what the future may bring. If insider selling is any indication of perceived fair valuation then the recent almost doubling of the price taking the stock to a 98 earning multiple of around 100 may be a bit overdone. Notice I have not said that AOL is a destined to zero short. I do intend to cover but at much lower prices which I assure you will come. Bad news also happen and markets correct. When this happens high flying puppies with no evidence of past financial performance [like AOL] take a big hit. IMO, AOL is currently overpriced. If I were long I would definitely be taking profits now. If you like the fundamentals, you will have plenty of opportunity to jump back in at lower prices.

For the internet business as a whole there is no question about the existance of significant market potential people are still trying to figure out how to best exploit this interactive media [look at Netscape]. IMO the economic side of the ISP business is not that attractive and the viability of significant profits from alternate forms of revenue remains to be proven. It is easy to get a false sense of security when the stock price is up [when it should really be the oposite]. I hope you recognize we are talking about two way risk here. I must admit that there are other shorts in my portfolio for which the upside risk is much lower. Would I have shorted AOL at 74 if Iknew it was going to 120+? of course not! but this is a sunk cost! at 120 IMO it is a fair bet!

Thanks for the input.

Pancho
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