infoseek, an internet stock that lets you sleep.....
How to Invest in the Internet -- And Sleep Soundly
January 21, 1999 - 6:43 PM
By Andy Wang
I'm not certain what my comrades at the Raging Bull were thinking when they saw rival financial Web site Marketwatch.com (MKTW) close at $97 1/2 on its first day of trading last Friday, but I can speak for a few close friends and former colleagues at other competitive Web content ventures.
The general reaction I got during phone conversations on Friday was stunned disbelief, and even a little disgust. It was jealousy, really. Many of us spend a lot of time tracking Internet stock mania, but this, this was too much.
Now don't get me wrong. Marketwatch is a fine Web site, full of solid journalism, but a 473 percent run-up in its first day? This is beyond lunacy. This is a market being dictated by day traders who resemble crack addicts playing Pong.
Perhaps I'm just a little bitter. OK, I'm more than a little bitter, but I'm not the only one. A couple of themes kept coming up in my Friday discussions: Why isn't this us? And more important, what if the frenzy's about to end? What happens then?
For some reason, this all made me think of Chris Byron, who has written the same column in the New York Observer half a dozen times. You know, the column about how the eventual Internet meltdown “isn't going to be pretty” and how investors should prepare for “the shellacking of all time.” And he's repeated this theme in numerous columns for MSNBC.com. To borrow a phrase Byron has used recently, I'm just guessing here, but I think it's also pretty safe to assume that he's gotten some mileage off his premise in the pages of Playboy and the virtual pages of TheStreet.com.
Byron is a fine journalist, who has done some fabulous work at places like Esquire and Fortune, but this consistent piling on makes him seem like nothing more than some crazy revolutionary pamphleteer who stopped being interesting the third time he predicted the world was going to end. With the freelance rates that Byron commands (upwards of $1 a word), his editors should demand more than just rehash.
Yes, he is probably going to be right eventually, but companies like eBay (EBAY) and Amazon.com (AMZN) have just spent the last year making him look like a not-so-Motley Fool.
I mention all this because I'm also starting to believe that the tulip mania is about to end, and many of my friends, being self-loathing journalists, are starting to imagine the horrific endings to their Web dreams. We could all end up being Chris Byron, or worse, Michael Wolff, and that thought alone could convince any of us to fill out an application at Blockbuster.
But there is a difference. We're just all too inherently pleasant to end up like that.
But enough about us, let's talk about you, the Raging Bull reader. Unless you were lucky enough to get in the Marketwatch I.P.O., you probably are thinking that you missed out on yet another change at free money. And I'm hearing a lot of talk about how it may be best to not invest in any Internet companies.
The thinking is that if an eventual collapse doesn't burn you, the daily volatility and stress will shorten your life. But there is an alternative. Instead of buying the Yahoo!'s (YHOO) and Broadcast.com's (BCST) on the market, you can invest in strong companies that will benefit in huge ways from the Internet's explosive growth.
Here are seven stocks that will let you ride the Internet mania, and also allow you to sleep soundly – and sleep late. These are companies to invest in for the long term.
Lucent Technologies (LU): With its $18.5 billion dollar deal to purchase Ascend Communications (ASND), Lucent is poised to be the Internet technology titan that will crush all the other titans. It's been a consistent winner, with strong earnings, ever since being spun off from AT&T in 1996. Competing with companies like Cisco (CSCO) isn't easy, but Lucent's innovation is it's biggest weapon. Quite simply, Lucent's Bell Labs may be the best research and development arm of any company in the world.
3Com (COMS): While Lucent is still figuring out the logistics of merging with Ascend, 3Com already knows all about the struggles of a megamerger, like restructuring and layoffs. But now that the chaos of its merger with US Robotics is behind it, 3Com stands to benefit greatly from the explosion in home Internet use. Hackers and software pirates have sworn by USR modems for years, and it's only a matter of time before everyday shoppers learn that this is the superior brand.
General Electric (GE): With stakes in a portal site (Snap), the most popular daily news site (MSNBC), and the top women's network on the Web (iVillage.com), GE's peacock powerhouse is proving just how serious it is about dominating Internet content. NBC News chief Andy Lack is a man obsessed with synergy, and his influence on news on the Web is immeasurable. NBC's strategy is all about finding good deals even if it means its sitcom stars chat on Yahoo! instead of MSNBC.com or it competes with Microsoft's portal site. With this many irons in the fire, there's going to be multiple sparks.
Microsoft (MSFT): Isn't it obvious that Bill Gates will do anything possible to make sure Microsoft isn't left behind in the Internet business? With portal site MSN.com, e-commerce experiments like travel site Expedia, content powerhouses like MSNBC, the Sidewalk city guides, and highbrow experiments like Slate, this is a company that's into much more than even NBC. Oh, and if you've forgotten, they've also got this really popular Web browser -- oh yeah, and a stranglehold on operating systems that's so strong that some are arguing that it can't be legal.
Disney (DIS): Heavily invested in almost every kind of media, Disney is now poised to turn Go.com into a major portal site. It will be interesting to see if Disney's dollars can equal Yahoo!'s always-growing eyeballs, but the fact that ESPN.com is the biggest sports site in the world can only help. After all, sports, sex, stocks and shopping are the Big Four on the Web.
Zap (ZAP): Yes, I realize all the class-action lawsuits against Avie Glazer's fish-oil company can't help. (Read: Zap May Have the Last Laugh). And it's easy to argue that this company is going to create something akin to a thrift store on the Web. But what's wrong with a discount strip mall? We all can't shop at Neiman-Marcus. Zap has a healthy cash flow and solid P/E ratio. There's no funny money here.
Knight-Ridder: Its Real Cities network of local newspaper Web sites has the folks at Microsoft Sidewalk scrambling, and sites like Cars.com and Jobhunter.com provide the exact type of services that many people search for on the Internet. These sites allow people to use the Web to simplify their lives, which is why many people get online in the first place. Newspaper companies aren't sexy investments, but this is a newspaper company that's experimenting with both web content and e-commerce.
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