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Technology Stocks : Inktomi (INKT) -- Ignore unavailable to you. Want to Upgrade?

To: Sepster who wrote (1811)	11/28/2000 10:43:51 AM
From: Platter	Respond to of 1945

James J. Cramer on INKT :: What to Sell When Things Get Ugly By James J. Cramer Capitulation comes in many strange ways. These days, capitulation comes in the forced selling of loved stocks. That's what we saw happening Wednesday morning. Believe me, the fund managers who own BEA Systems (BEAS:Nasdaq - news) and Inktomi (INKT:Nasdaq - news) didn't want to sell it. They knew there was nothing wrong. But they were probably also long Portal Software (PRSF:Nasdaq - news), and, to be brutal about it, they can't sell enough Portal Software to raise anywhere near the sums they need to meet the redemptions. I want to emphasize, before I spend too much time talking about redemptions, that there is no joy in writing about them or talking about them. I don't wish ill on any manager and I want them all to do well because they control your hard-earned dollars. But in the last few years they have known only inflows and happiness and now they are faced with unhappiness and outflows. It is a strange and alien concept for many of them. The inexperienced managers will sell their big liquid stocks and maintain their illiquid losers to meet redemptions. They will not be in business when the cycle is over. I say that confidently because I have seen it happen hundreds of times. Those who take the hit and sell the illiquid stocks and the losers will do better on a relative basis. Understand why I know this: I have been there. My fund was hit with a big redemption a few years back owing to some internal squabbles among my limited partners. It was painful and I am glad it is all patched up. But it was as rough as a bed of nails. We had to sell $100 million worth of stock in a five-day period and we chose to sell the most illiquid losers because, had we kept the illiquid ones and sold the big liquid winners, we knew we would never make it back. It is far easier to sell the liquid winners. It is less embarrassing and much less complicated to sell 50,000 shares of Microsoft than it is to sell 50,000 shares of National Gift Wrap & Box, a small-cap stock for which you will have to accept a discount bid if you are going to get out. (Newbies: A discount bid means that if the stock is trading, say, at $14, you might get as little as $12 for it by the time you are done knocking it down on the way out.) But that is better than losing your best liquid names, the ones that will snap back fastest when the selling squall, or perfect storm, is over. I am stressing the peril of redemptions because selling that comes from redemptions seems almost irrational. The outside observer, running her own money, looks at Inktomi today and says, "What the heck is the matter with Inktomi?" While I look at it and say, "Inktomi is owned by the same folk who own Portal and CacheFlow (CFLO:Nasdaq - news). They are bailing because they have to. They have to raise cash!" At the same time that these funds are raising cash, the venture capitalists are out there banging down any bids they can find. They are anxious to show some gains before they turn into losses. And the executives, of course, have been selling all along because many of them never believed their companies were worth what they are selling for anyway. A profit's a profit until it becomes a loss. One of the reasons I have been stressing the foods and the drugs for so long is that they have none of these kinds of sellers. The selling in those names is related only to the fundamentals. There are no profit-takers in these sleepy situations. There are just S&P index funds that don't sell anyway. They sacrifice massive, quick price appreciation for slow and steady growth. But last time I looked, that beat being down 50% any day.