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Strategies & Market Trends : Gorilla Game Investing in the eWorld -- Ignore unavailable to you. Want to Upgrade?

To: Jill who wrote (328)	9/15/1999 10:31:00 AM
From: Teflon	Read Replies (2) \| Respond to of 1817

I thought this article might interest you: INTERNET STOCK NEWS: Sept. 14, 1999 "A Safer Way to Play the Net" by Henry Lee, ISN Writer CMGI Inc. (NASDAQ:CMGI) and Internet Capital Group (NASDAQ:ICGE) have garnered the attention of the business press and investors' dollars by investing in Internet related companies. Internet Incubators, companies that invest in up and coming private companies with the hopes of taking them public are the rage of Wall Street. These companies claim that their business model allows them to create synergies between the subsidiary companies they own and provide the needed management expertise many start-ups lack. These Incubators give the individual investor a vehicle for making a diversified investment in private companies that they may not otherwise have access to. Apparently the pitch has struck a cord with investors as CMGI and Internet Capital Group each currently boast market valuations approaching the $10 billion mark. The concept seems like a sound idea given the track record of previous investments made by CMGI and Japan's Softbank Corp. Investing in these two venture giants would have given you a stake in Lycos Inc. (NASDAQ:LCOS), Yahoo! Inc. (NASDAQ:YHOO), E-Trade Group Inc. (NASDAQ:EGRP) and Geocities. The problem is determining how much value the incubators bring to the table. You can bet the hype generators have added immensely to the premium above asset value you need to pay for shares of CMGI and Internet Capital Group. As little as 20% of Internet Capital Group's stock price can be attributed to the current asset value of current holdings. One way to play the Internet Incubator game is by doing a little research to find out which other companies own shares in these high flyers. A quick look into the SEC filings of Internet Capital Group shows that Comcast Corp. (NASDAQ:CMCSA) owns 10.5% and Safeguard Scientifics (NYSE:SFE) owns 14.9% of the hot incubator. A closer look will show that the founders of Internet Capital Group, Ken Fox and Walter Buckley both worked for Safeguard Scientifics. Certainly the two companies still have close ties so I decided to look into Safeguard Scientifics to find out what they do. Safeguard is in fact a technology incubator itself and has actually been at it since the 1980s when it backed companies like Novell Inc. (NASDAQ:NOVL) and Cambridge Technology Partners (NASDAQ:CATP). Safeguard's investment in Internet Capital Group alone is worth $1.3 billion dollars, more than half of its current valuation. Besides owning stakes in several other valuable companies, you might notice that Safeguard and Internet Capital Group have both invested in some common companies. While I do not currently own shares of Safeguard Scientifics, I think it is an interesting example of how you can find *comparative bargains* by doing a little research on the holdings of investment-oriented companies. With the large technology companies like Lycos and Intel Corp. creating venture funds and Internet Incubators like E-Companies Inc. planning on a public offering soon, the hype around these investment stocks looks like it will continue for some time. If you like the incubator business model but cringe at paying the hype premium that goes along with it, a little bit of investigating can bring up a few intriguing alternatives. Teflon