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Technology Stocks : Internet stocks for the long-term? -- Ignore unavailable to you. Want to Upgrade?

To: INTERNETCORP who wrote (3)	9/22/1999 10:45:00 AM
From: Joe Mintz	Respond to of 4

Thanks for the interesting feedback. (Sorry for the delay in response - I have been thoroughly occupied with other issues.) It seems that one of the biggest challenges in selecting a suitable portfolio of internet stocks lies in sifting through the huge pile of possibilities. Even concentrating on one sector of activity, like internet service providers, the list is still a bit large. In the future, internet analysts will probably have to specialize more on certain parts of the business. Anyway, I agree that the key lies in finding which company will dominate each area. However, oligopolies could emerge as well, and given the explosive growth which will probably continue for the industry as a whole, the top couple of players should reap huge returns. I like a few stocks in particular because I believe they are relatively undervalued, represent major areas of business potential, and seem to have a solid grasp of their particular sector. SPLN and TMCS lie at the top of the list but are also rather volatile in the short-term. It seems to me that recreational areas like sports content will continue to grow considerably in their appeal. SPLN has the best writers (arguably), a solid foundation as well as aggressive plans for expansion, valuable connections through CBS, and has emerged as the leading sports content provider on the web by certain measures. TMCS has a strong grip on ticket sales activities over the web - I believe that consumers will rely more and more on this service, making the firm's stock close to a sure thing (of course, nothing is perfectly so) in the long-term. I don't want to delve into details - I have already put some detailed comments up on both of these issues. But I believe it is important to look at this basic line of thought. What areas of e-commerce and more generally internet activity stand to gain the most in the longer-term? Is any firm or groups of firms emerging as the top candidates for each of these areas? For ISPs, I remain very concerned about competition, including price pressures. In Europe, subscription fees have begun to slide (free access is offered in England), and AOL, for example, has followed suit by lowering its prices and offering cheaper alternatives. This trend may become very important since international expansion represents a key to the future profitability of AOL and others. Thus, I think that before one begins to select the dominant player(s) in each sector, it might be worthwhile to reflect on the future of the sector itself. It should be realized that the use of some functions on the internet may fade as the population loses interest at times. For example, online brokers may continue to see fluctuations in trading volumes, not just persistent robust growth. The internet stock hype (which has changed by now into more selectivity) may have initially led some investors to assume that stocks in all sectors had great potential. This may not be the case at all as some internet activities naturally have more appeal to people than others, and preferences change over time. But, there was a reason for this 'hype' - those firms which are placed in the right areas and execute properly will offer shareholders substantial returns. Many e-tailers also have had problems with distribution that need to be addressed. These issues will generally favor the blue chip names and the especially well-capitalized internet firms. For books, for example, bn.com has the best chance to thrive as order volumes expand due to its already solid distribution framework linked to the parent barnes and noble, which is being extended further. BNBN is probably a solid holding on a 3Y horizon for many reasons. Generally, though, one must look for the names that have not yet been heavily publicized or favored in the investment community. That is part of the reason I would tend to avoid buying AOL or YHOO, for example. When SPLN gains more recognition over the next year or two, the difference could be a factor of 3 or 4. Still, short-term risks remain high, particularly with the cloudy Y2K cliff approaching. Good luck to all. J.M.