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Technology Stocks : AUTOHOME, Inc

ATHM 23.44

+1.0%

10:28 AM EST

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To: E. Davies who wrote (7054)	3/28/1999 6:06:00 PM
From: ahhaha	Read Replies (1) of 29970

The net stocks are enjoying the first phase of structural evaluation. A structural evaluation is not the same as a cyclical evaluation which occurs to established companies. In the past established was represented by the term "blue chips". They have seen the end of the growth phase and are usually sufficiently established to pay out dividends. Net stocks have just entered the growth phase. These phases occur independently of intervening bear and bull markets. You can be in lots of growth stocks in a bull market and end up with miserable results and you can be in stodgy companies in bear markets and have great results. The risk now to Net stocks is that they aren't seasoned. The companies don't know if they can survive an industry shake-out or an economy shake-out. Shake-outs are crucial for industries and economies because it is the way capitalism gets rid of the inefficient or the indolent. The FED attempts to resist what capitalism would do. That's why the top will be extended and the downside will be long and gradual. One might as well get a job. That's why the net stocks aren't very risky as a group, they are still in the growth phase, but that doesn't mean they are great investments. With their current valuations they're nearing stodge, because though their earnings come in according to past expectations, much of those expectations are in the current prices. So their stock prices flatten out with the rest of the stodge edging towards the down side. I say the down side because a lot of the established companies are selling for absurd multiples simply because they are perceived to be in a bull market. I recently stated on another thread that it is the big companies that are on the bubble, not the net stocks. If there is an exogenous shock and the bubble pops, the Nets will plunge with the rest, but the Nets will come back at the cost of the old slow or non-growing companies. These leftover 19th century companies are dinosaurs and they are approaching the KT boundary. We are watching for the distant SN signal which will hurry them on their way. FED can't save a dying buggy whip.

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