B.A. Marlow...
Let me start by saying that I will never short GNET again because of fear of a buyout. That is the ONLY reason.
In response to your message, I disagree with you. I see a bubble. These companies are not intrinsically worth these sorts of valuations. I am not afraid to say that, but that does not mean these things will not continue to go up. I have made money with straddles on stocks like AMZN and YHOO because all I can say for sure is these stocks will continue to make 10% gains or losses in a day typical.
However, I know this is sector is a speculative bubble. You cannot justify these market caps long term, and as someone who works in the internet industry as a developer I know that current trends are NOT friendly to earnings for these companies down the road. For instance, technologies that will help you find the cheapest price on an item are developing rapidly. This means that I can search for a book and buy it from whatever site is the cheapest. Stocks like GNET and YHOO are a little more safe in that they can raise advertising rates, however if the net develops like TV then sites like YHOO and AOL will get far greater advertising rates vs. a site like GNET because of the number of users. It is not a linear relationship either, i.e. if GNET had 1/10th the number of page views of YHOO that would probably not be able to get 1/10th the fees in advertising, more like maybe 1/100th. This will happen it is just a matter of time.
You may wonder why I feel this way working in the industry. Well, many of my friends who are 23, 24, and 25 making 60,000 - 80,000 per year because they are good developers (as you may know, the top 5% of developers can program 10 times faster than those who are average) are buying these stocks like crazy. They have lots of cash for someone their age (well, I certainly feel that way about myself and I hope they do too) and basically have no clue what they are doing. They say things like "internet stocks always go up" and "earnings don't matter." They have made a large sum of money over the past year, but I fear they may lose it back. Why? Because they are margined to the hilt (as much as their online traders will allow) and have already told me the are not nervous about being margined because these stocks never "go down more than 20%".
Maybe they are right and I am wrong. Maybe 400% gains in three months are typical and looking back at history is a mistake. However, I will take my chances. Watching these guys "invest" scares the hell out of me and I just can't go long at these prices with those sorts of people as shareholders. (Don't get me wrong, I have been long on these stocks in the past, not because I actually thought they were good deals but because I knew people like these friends of mine would buy like crazy for a year at least.) That year is up and I am locking in profits.)
Good luck to you. We will see who is right in a few months... |
