OT: re: who makes internet profits:
1. shorting just because a stock has a high PE, or no E; or buying just because a stock has a low PE, is not the way to make money. Dominant companies in rapidly growing industries (MSFT) deserve high PEs, and will maintain them. Weak companies in slowly growing industries (GM) deserve their low PEs, and will maintain them as well. In April 1997, CSCO had the highest PE of the group of 4 companies that dominate its industry. I bought it, in spite of that, and it has far outperformed the others. The key is to find companies that don't deserve their current PE. The PE is important relatively, not absolutely.
2. High tech seems to be a winner-take-all arena, where the dominant company makes most of the available profits in each niche, 2-4 other companies survive (with unhappy shareholders), and everyone else slowly dies. Until the industry has matured enough so you're sure who that dominant company is, investing in that sector is very risky.
3. I agrea completely that the content providers will make money, and the service providers won't. There is no way to achieve a monopoly, or even a franchise, by providing data service, no matter what the data. We are rapidly moving to universal, cheap, reliable internet access.
4. The other industry that will make money is the equipment and (noncommodity) component suppliers. The internet is the biggest "killer application" of all. In fact, it's made the name "computer" obsolete. Maybe "communicator" would be better. I and my family spend about 4 hours a day on our computers, at home and work. But we do almost no computing (i.e., number crunching). Almost exclusively, we use it for communicating. In the last 3 years, I've noticed a steep drop-off in the number of letters and phone calls I (and my family and co-workers) make, and a corresponding increase in E-mail/internet use. If not for its communication use, and kid's games, I'd still be happy with a 386 processor and 4 meg of RAM. So, I consider INTC and AMAT and TI (and of course CSCO) to be internet plays, and a lot safer than any content or service provider. Can you predict, reliably, who will win the content wars? I think it's a lot easier to predict who will win the equipment wars.
5. Digital convergence is (finally) here, there are a lot of obsolete companies that make or own obsolete methods of data transfer, and are in cozy oligopolies. They are all in trouble. The list here is huge, and not always obvious. Secondary and tertiary effects will be more important than the obvious primary effects. For instance; Who makes the newsprint that newspspers won't need when classified ads all go online? Who makes the ink on the newsprint? Who makes the chemicals for the ink? Lots of opportunities for shorts here. |
