Malko:
An interesting timely article for your perusal.
"Investors try to catch Net's next rising star"
As prices surge, analysts warn against rushing to buy stock in unproven companies.
BLOOMBERG NEWS
NEW YORK -- Theglobe.com Inc. and other new Internet stocks surged in heavy volume yesterday as investors bought lesser-known Internet names to capitalize on a sector that has seen dazzling runs from established companies.
Theglobe.com, a Web site that lets people set up free personal home pages, rose $54.50 to $63.50 in its first day of trading. It was the fourth most active stock in U.S. trading yesterday. Infonautics Inc., of Wayne, Pa., rose $3.25 to $5.625, and was the third most-active stock. Go2Net Inc. rose $9.75 to $39.25.
Shares of Infonautics rose as much as 250 percent yesterday as word of its new Web site spread.
The Web site, Company Sleuth, searches electronic databases to collect corporate information -- including details on insider selling, patents, domain-name registrations, stock ratings, news and chat-room gossip -- that investors, in particular, find useful.
The Dow Jones industrial average also gained yesterday, closing up 89.85, or 1 percent, to 8,919.59. The Standard & Poor's 500 Index rose 8.03 to 1,125.72. The Nasdaq Composite Index fell 3.07 to 1,847.99.
Investors have pushed up the price of well-known Internet companies such as America Online Inc. and Internet directory Yahoo Inc. Now, investors are looking for less-expensive Internet stocks, even though they may be unproven and make little or no profit.
"Investors are looking for secondary and tertiary names right now," said Jeff Goverman, an analyst at Pacific Crest Securities. "They think that these companies are going to get the same kind of growth" as Yahoo, AOL, or Amazon.com Inc.
Those established Web portals dropped yesterday. Excite fell $2.938 to $49.438, Yahoo dropped $5.25 to $168 and Amazon.com fell $3.25 to $127.75.
Those stocks have had spectacular runs this year, with Excite up 230 percent, Yahoo up 385 percent, AOL gaining 308 percent and Amazon.com rising 324 percent. The gains have drawn interest to newer issues.
Some analysts cautioned people from investing in Internet companies that have yet to turn a profit.
"It's OK if the purebred dogs are showing well, but when you have the true mutts showing sharp rises, it probably shows we're in for a correction," said Keith Benjamin, an analyst at BancBoston Robertson Stephens.
Many investors and traders are trying to guess which company will be the next big gainer because the Internet is still young.
"The Internet is the big growth story of the decade," said John Clay Evans of Global Trading Partners in San Francisco. "It's one of the biggest revolutions we have. No one knows how it's going to settle out and who are going to be the dominant players."
Many investors say the Internet industry is one of the few technology sectors that appears to be insulated from the global economic slump. Some investors are shying away from software and hardware companies that have been rattled by the turmoil in Asia or inventory problems, and turning to new Internet companies without those troubles.
Others analysts think the Internet run-up will hurt investors in the long run.
Abhishek Gami, an Internet analyst at William Blair & Co., expressed concern that some investors aren't studying these companies thoroughly.
The meteoric rise of these smaller Internet stocks will end up hurting the companies and investors, Gami said.
"It's inevitable that the market will come down," he said. "It's bad for the companies because there's a spike in their stocks they can't sustain, and investors will then ask why their shares are 50 percent off from their high. The last guys into these stocks will get burned."
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This article contains information from Dow Jones News Service. |
