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From Briefing.com...INTERNET STOCKS: The trend is your friend... the trend is your friend.. the trend is your friend. That has certainly been the case for Internet stocks in 1998. Honestly, an Internet name that has not climbed at least 50% since the beginning of the year is considered a dog. In fact, the ones that haven't made this type of impressive move happen to be just that, dogs. (e.g. CyberCash, a company with a $150 mln market-cap, yet logged '96 sales of only $127K and more red-ink than we care to discuss). As we've been saying on this page for the past several months, Internet stocks are being viewed by the market as a safe-haven from problems in Asia. In addition, this is one of the few groups where the fundamentals are actually improving: PC sales, for the most part, continue to be robust; advertising revenue is picking up, saturation has not nearly been reached, with approx. 50% of homes with PCs not yet having Internet access; Pres. Clinton against imposing new taxes on Internet retailers. All's well in Internet land. However, there is one concern. When the market finally begins to react to the dramatic slowdown in earnings of S&P 500 companies and various areas of tech, will the dramatic multiple expansion experienced by these stocks over the past few months hold? To be sure, there is considerable momentum money in these names. Will they posses the fortitude to stick around? Our opinion is probably not. Which is why we recommend that investors continue to monitor Internet stocks as potential shorts, as profit-taking in these names could lead to momentum selling, which eventually leads to panic. The key is not to be a market-timer by attempting to pick the peak in these stocks. Once they begin to crack, it will be evident, and there will still be plenty of money to be made. Remember, the trend is your friend: both on the upside and the down. |
