Had to short LCOS today. Internuts way out of hand
TALKING POINT/Internet fund managers cautious
Reuters Story - July 21, 1998 13:55
By Huw Jones
NEW YORK, July 21 (Reuters) - As Internet stocks soar on
the seemingly unlimited fuel of investor enthusiasm, seasoned
fund managers are growing more cautious with each passing day
of double-digit price gains.
Internet stocks were surging again on Tuesday, led by
Mindspring Enterprises Inc. , up 19-5/16 to 136, a day
after Internet bookseller Amazon.com Inc. surged
nearly 18 points.
"We have gone into the realm of high speculation," said
Lawrence York, lead portfolio manager at WWW Internet Fund.
Market capitalization of many Internet companies now rivals
that of long-established brand names, with valuations at lofty
levels despite the dearth of profits in the sector.
"We have had an incredible run for most of this year, which
is clearly unsustainable at this pace," said Ryan Jacob,
portfolio manager of the Internet Fund.
All three funds, with assets of $2 million to $45 million,
are minnows compared with giants like Fidelity, but they have
been around for about two years, making them veterans in the
emerging world of Internet equities.
Returns on the funds this year have been in double-digits
and have easily outpaced leading stock indices.
York describes the publicly traded Internet companies as
adolescents, and counseled investors to avoid being seduced by
their youth.
"A whole class has gone public before their time -- they
don't have positive cash flows, earnings and so on. They are
the type of companies venture capital would keep under their
breast for a number of years and it's the general public that's
putting up the money to test these companies," York said.
Paul Cook, portfolio manager of Munder's NetNet Fund, said
a 20 percent correction was possible in some Internet stocks,
and he has trimmed back on holdings in Lycos Inc. ,
Yahoo! Inc. , Amazon.com, and Cnet Inc. .
In contrast, the NetNet Fund has increased its holdings of
online brokerages such as Ameritrade Holding Corp. ,
Charles Schwab , E*Trade Group Inc. , and in
Internet security companies like VeriSign .
Evaluating share prices is still tricky and defies the
textbook approach, he said. |
