Barron's article - last section.
Michael Murphy, the newsletter writer and fund manager, has just crawled out onto a long limb. In big, bold type on the front page of the April issue of his monthly Overpriced Stock Service newsletter, there's a headline advising investors to -- you guessed it -- "Short The Internet." And he's talking about the sector's biggest names. Like Amazon.com. On-line book sales, he contends, will be "a cutthroat business with razor-thin margins." He's also short Lycos, which he believes will get crowded out by larger competitors. "If they were a division of a Silicon Valley company they would be shut down as an also-ran not worth investing in," he writes. "As a Massachusetts company they get a billion-dollar market capitalization." Also on his hit list: OnSale. While the on-line auction site continues to build revenues, he notes, losses have been accelerating.
Murphy also advises shorting Infoseek, noting the company is "losing even more money per share than Lycos." He's short Excite, too. And in perhaps his boldest pronouncement, Murphy advises shorting Yahoo!. He contends advertising on Yahoo! doesn't accomplish very much. "Their effectiveness rate is near zero; that is, quality buyers are not being delivered to the advertisers," Murphy writes. "In a great media year like 1997 everyone makes money. Media budgets are high and there is cash to experiment with new outlets like the Internet. As the U.S. economy slows, advertising budgets get cut back and guess who gets cut first? You got it. Folks who cannot demonstrate cost-effective impact that sells products and services." The newsletter's list of "potential prey" includes an array of other Internet companies, including CDNow, Doubleclick, Go2Net, Network Solutions, Sportsline and VeriSign.
More than a few smart hedge-fund managers have been wounded in recent months trying to short these very stocks, so if you choose to take Murphy's advice, move cautiously. Last week's huge moves demonstrate the danger of being on the wrong side of one of these stocks. As noted in last week's Trader column, some institutions have been buying baskets of Internet stocks, bidding up prices seeking exposure, without paying a lot of attention to fundamentals. Until that changes, shorting Internet stocks will remain a highly dangerous activity.
Kudos to Intel, which not only made its post-earnings-report conference call open to the press last week, but also broadcast the entire call live via its investor-relations site on the Web, www.intc.com. Until April 27, you can replay it from the Web site. Intel will take a similar approach with its analysts' meeting this Tuesday in New York. The whole thing will be broadcast over the Web.
E-Mail Eric Savitz at savitz@barronsmag.com |
