Barry, My opinion is that you need to first understand the reason why this happened-the internet mania. In October, Yahoo had come off a great quarter but the stock like other nets got slammed because of the correction in the market.
Meanwhile, the institutions/funds had lost a great amount of money in the financials,hedge funds and other traditional investments. This resulted in lower fees, earnings and share price.
While the average investor was contemplating buying treasuries, the funds and institutions were looking for alternate investments to replace lost valuations and increase portfolio return for the remainder of 1998. Their choice was the internet leaders:AOL,AMZN,YHOO etc. Traditional investments wouldn't work-low earnings growth for the BLue Chips combined with low interest rates. Thus, the nets-high growth/no earnings/no valuation methods was the ticket. I know this because I deal with institutions and funds.
The question today is, Have they made enough money? I believe so.
I sold YHOO at 190-200 in my accounts that I held since the 1996 lows-call me stupid.
I agree with your series of events playing out but will add that when
the selling starts good luck trading on-line. This will only add to the fear.
Merrill has made the call on AMZN and other nets-the small investor hasn't listened. Merrill strongly supported the nets until this point. I worked for Merrill in the 80's and when they make a call you better listen.
Like the first NSCP, YHOO etc. fall from grace the semiconductor industry was coming off a bad period much like today but suffered a
tempory setback on the correction that happened when the nets fell.
After the correction, the Semi's became the lead sector with the core Tech MSFT,CSCO,DELL,INTC becoming the safe haven. YHOO etc went to the lows.
The nets are a reflection of what is right and wrong with the market.
The right being an acceptance of Technology by Wallstreet and the average investor. The wrong being buying equities based upon no fundamentals shows lack of experience.
My clients were long AOL, YHOO, AMZN, INKT, EBAY etc when the companies dictated an investment. Recently, when the companies stopped acting like investments but became just a symbol and a price, I sold them. We can only control what companies we invest in. We cannot control the market.
I hope that I am wrong-I don't want the market to go down. The sad part of the mania is that good companies that have gone public will have a hard time in the future raising money with a depressed stock price.
Michael |
