Here is one good report:Wall Street dazzled by Web alchemy
By Aaron Task
MSNBC/INVESTOR
HAVING RISEN sixfold in the past six trading days,
K-Tel (KTEL) did what would have been unthinkable just a
week ago, announcing a 2-for-1 stock split. In case you
missed it, what has moved the firm's stock from 6 5/8 at the
close of trading April 10 to 43 7/8 Tuesday (following
another 2¬ rise Tuesday) is its announcement that it will sell
its offerings on-line.
To the best of our knowledge, K-Tel has not invented
any new technology that will speed up Internet connections
or resolve troubling bandwidth issues. Selling its products
on-line doesn't even address the quality of K-Tel's music
titles, which some find distasteful. Yet the stock is acting as
if the company has discovered the secret of turning water
into wine.
That friends, is mania.
"K-Tel's stock never got out of its way. Then they said
they're going on the Internet and `boom,' " said Scott
Bleier, chief investment strategist at Prime Charter. "Are
they going to do that much more business to justify that
increase in valuation?"
Like many on Wall Street, Bleier believes the
performance of the Internet stocks is unsustainable.
"If you're an individual thinking about buying them
here, you should have your head examined. You'd be
jumping into the classic frenzy," he said. "When you value
things on future growth, you're forgetting about market risk,
let alone risk in that industry where the rate of technological
acceleration is so fast. If I were a corporate insider, I'd be
blowing stock out left and right."
Be prepared for some disclosures about insider selling
at Internet stocks in the coming weeks; the kind of
information that can shake investors' confidence in a given
name.
The most recent insider trading activity at K-Tel
happened to be a sale in early March, undoubtedly with
some regrets now. Additionally, there has been a string of
insider selling activity at the likes of Excite (XCIT), Yahoo!
(YHOO), Lycos (LCOS) and Infoseek (SEEK) in recent
weeks and months as those search-engine stocks continued
to soar higher and higher.
Also, be on the lookout for revelations about insider
buying at some of these firms ahead of Internet-related
announcements; the kind of information experts say often
gets the attention of Wall Street's regulators.
On March 31, for example, Mark Burka, director of
Market Guide (MARG), bought 45,000 shares of stock at
$3, according to Investor. Market Guide rose 15 1/16 to
23 Tuesday on word it has signed an agreement to provide
financial tools to America Online's (AOL) personal finance
site.
Market mavens like Bleier and Bill Meehan of Cantor
Fitzgerald say those long on the Internet stocks will soon
get their comeuppance - just as did many owners of
biotechs and other favorites before and since. However, the
day (or days) of reckoning for the group probably won't be
Wednesday. The momentum is still too powerful. |
