It's interesting to look at a historic chart of the DOW utility index.
Nice to see a contrarian view.
Utilities, like AOL, were bid to fantastic levels in 1929.
But utilities, unlike AOL or the internet, required a tremendous amount of infrastructure ($$), had low margins, and were regionally restricted.
It has taken nearly 70 years for the utility index to double, and the index lost 95% of its value in the great depression.
So did steel, financials, etc. Faulty analogy. There was something called the Great Depression starting.
...use valuation models like the rest of the utility sector, I get a price of $10 a share.
And if you use oil stock valuations you might even get five bucks :-)
Most investors expect the speculative internet bubble to burst, the question is what companies will survive, and can you make enough between now and then. AOL is the blue chip of the internet, although even it will correct quite a bit during the shakeout. However, following such a shakeout the weak will die and the strong will get stronger. We will see who the strong are.
In the meantime, an investor can either ride these puppies up, or stand by the sidelines and watch the ride. |
