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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: lee kramer who wrote (89168)	3/20/2000 12:02:00 PM
From: gaj	Respond to of 120523

mstr / barron's... mstr - got short at a much higher price pre-market this morning. also covered pre-market :) {oops!} according to cnbc this morning, someone sold 50K shares at 226 on instinet at 8:02; press release didn't go out til 8:11. insider information? barron's - this is from briefing. it summarizes my feelings on barron's to a t...they've got good stuff, but they always overdo it... As is often the case, Barron's takes a good idea and ruins it. We noted last week that that the Peapod (PPOD) news introduced a new era for the Net: the era of bankruptcies. Barron's also picked up on this new era, but then made a mockery of the idea. The cover story included two huge flaws which made the conclusions of little value. First, in calculating burn rates, Barron's assumed that a company's operating margins going forward would remain unchanged. Companies moving towards profitability were therefore treated the same as companies whose losses were increasing. Second and even more important, Barron's paid no attention to a company's ability to obtain financing. Certainly Peapod is in a very different world than VerticalNet (VERT) right now. There is a very real risk that PPOD will not obtain financing and will have to declare bankruptcy. But VerticalNet? Please. Whatever you think of the company, there is no question that the market will gladly reward it with more financing. That could ultimately change just as it did for Peapod, but it won't change so fast that VERT will have difficulty addressing its near-term financing needs. The Barron's article highlights a key problem with journalist's approach to market stories. The risk of Internet bankruptcies is an important story, but as with most journalistic pieces, the Barron's story tries to approach it objectively. Objectivity means doing the math -- how much cash does a company have, what is its current burn rate, and when will the company run out of cash at the current burn rate. That's a reasonable starting point for a discussion of Net companies with potential cash problems, but only a starting point. From there, you must look at the trend in the company's finances -- is it moving toward profitability and will that help to avert a problem? Also, you must consider the prospects for financing. Clearly, all of the B2B companies mentioned in the story -- VERT, ICGE, ITRA -- will have no problem getting additional financing. Finally, there was the small issue of errors. CDNow (CDNW) was mentioned as running out of cash, but it just received a big cash infusion. And the numbers on HLTH were just wrong, according to Robertson Stephens. In short, the Barron's list of burn rates is interesting, but hardly a place to end the story. Much more homework needs to be done before believing that companies high on the list, like VERT, are about to go chapter 11. - GJ