Can't disagree on the valuations -- completely. These are interesting times. (Recall the ancient Chinese curse -- may you live in interesting times!) This web/e-commerce movement is powerful. Thus, it is understandable that the valuations are so high. Yet, it seems to me, (and probably to you), that things have gotten beyond themselves. I can't find much fault with the valuations of AOL and the major search engines. Indeed, I believe some of them will be worth many times more than they are today, just a few years out.
The current problem, as I see it, is twofold.
1) Picking long-term winners from losers (identifying viable business models and those with competitive advantage),
2) The absolute mania in some of these stocks. For instance, in the past two days some apparel stock is up something like 1600% because it announced that it is going to launch a web site. That's absurd! I've been involved with a web site for three years now, and we are doing well, but it has taken extreme effort to redirect marketing and strategy as the web has evolved. The web is not a get rich quick scheme for those launching a site -- it takes work and money -- or an IPO.
My conclusion? Most of these stocks are overvalued. I'm not going to pick the ones that are, 200+% pops are suspicious. Some of these stocks may be more fairly valued -- those that have viable business models. Their current prices will look very cheap in a few years. I consider the auction stocks to have viable business models, as well as the search engines and AOL. Which ones to buy? Buy the bunch on any big dip (with a small percentage of your portfolio), and wait.
Whatever you do, if you hold AOL, don't sell it. |
