Both Ken and I got quoted in Dow Jones today...thought you might find it cute!
NEWS STORY FOR TRAC 11
12:39 =7, 11 or Doubles: Internet Play Crapshoot For Some Stocks >
SYMBOLS: AOL CYSP HCOM KTEL MARG SEVL TRAC TSCN I/CSV I/ENT I/HOU I/IAS I/MED I/OTS I/PBO
By Johanna Bennett
NEW YORK (Dow Jones)--Imagine making thousands of dollars in just a few
minutes.
Kent Fernandez did it Tuesday.
Twice.
The 33-year-old management consultant from Los Angeles rolled the dice on the
Internet-craze game and came up big. He bought 1,000 shares of 7th Level Inc.
(SEVL) at $5 and sold the stock less than an hour later when it passed $8 a
share. Later in the day, Fernandez bought the Internet stock again at $9,
selling most of it when the shares peaked at $11.
He wasn't alone.
In the last week, low-priced Internet stocks like 7th Level, K-Tel
International (KTEL), Market Guide Inc. (MARG), CyberShop International Inc.
(CYSP) and more than a dozen others have skyrocketed - in some cases as much as
500% in one day - amidst hype from on-line financial message boards and
frenzied trading by individual investors.
The situation has perplexed market experts and some chat room pundists, many
of whom have speculated that these stocks may be running on hype and squeezes
by market makers.
"I have been a day trader for years and I have never seen anything like this
before," said Ken Wolfe, founder of a chat room for momentum traders. "I don't
know what the ramifications are. It's kind of scary."
But the phenomena has captured the attention of individual investors,
especially day traders, many of whom, like Fernandez, will be on the prowl
today for the next big bargain basement mover.
"I will just take the earnings I made (off SEVL) and try to double and triple
that," Fernandez said. "...There is just way too much money to be made out
there."
There is also big money to be lost. PC Quote Inc. (PQT) which gained 191% in
trading Tuesday, was down 23% in early trading Wednesday.
Internet stocks in general have been on the move since the start of the year
as technology investors, fearful of the hits being taken by PC makers, look for
new investments.
That surge began working down to the bargain basement Internet-related stocks
last week when K-Tel, a distributor of music and video entertainment, announced
plans to sell products over the Internet. The stock, which once sold for under
$7 a share, shot up more than 600% in about seven trading sessions.
Following the rapid surge in its shares, which has sent K-Tel's stock to a
year high of 49 1/2, the company announced a 2-for-1 stock split on Wednesday.
The stock is off 1/2 point to 43 3/8 Wednesday.
(MORE) DOW JONES NEWS 04-22-98
12:39 PM-- 12 39 PM EDT 04-22-98
Some market experts attributed the tidal wave to day traders looking for
another K-Tel-like bargain. Others, however, argued that it was more
"euphoric," with individual investors eagerly looking for the next Microsoft
Corp. (MSFT) or Yahoo! Inc. (YHOO).
"Just in the past few weeks, the attraction of the Internet has drawn
attention to these stocks," said Steve Goldman, spokesman for Yamner & Co. and
founder of a chat room for individual investors. "Investors in Yahoo and
America Online Inc. (AOL) said if the boom in the Internet means a boom for
these companies, then we should try and find the next Yahoo."
Whatever the reasoning, stock prices have risen rapidly, spurred by momentum
traders who are buying, immediately selling and buying again; panic purchases
by market-makers caught in short squeezes and constant chatter on Internet
message boards.
"The market has never been known to act in a rational manner...There is no
rhyme or reason for how the market will react to something," Goldman said.
Track Data Corp. (TRAC), a real-time financial information service, was up
255%, trading at 8 7/8 Wednesday morning. Alpha MicroSystems Inc. (ALMI) was
trading at 5 3/16, up 2 3/8 or 84.4%. And Telescan (TSCN), a provider of
devices for on-line data retrieval, was trading at 10, up more than 30% since
Monday.
Meanwhile, the previous day's winners, 7th Level and Market Guide Inc. (MARG)
both of which shot up more than 200% in trading Tuesday, were down more than
10% early Wednesday afternoon.
And in the backdrop are the chat rooms and message boards in popular on-line
financial sites like Silicon Investor, Yahoo Finance and the Motley Fool, which
have been filled with thousands of messages filled with speculation about the
next hot stock, warnings of sudden crashes or just amazed "Wows."
"I just sold my MARG. I figure a 300% profit was pretty good for one day's
work," wrote one participant on Yahoo's message board, referring to Market
Guide.
(MORE) DOW JONES NEWS 04-22-98
01:02 PM-- 1 02 PM EDT 04-22-98
Profits may be good for some investors. But market experts and some chat room
pundits warn of dire consequences for uninformed investors.
Experts warn that some of the stocks experiencing price surges appear to have
little basis for the momentum. And even strong stocks can easily find
themselves overvalued in a bull market where investors rage out of control.
Market Guide, for instance, had a market cap of $120 million Tuesday,
following a two-day price run up. But the company had earnings of $17,000 on
revenues of $1.7 million for the quarter ended Nov. 30.
"Some of these stocks are way overvalued," said Eric, an individual investor
and Yahoo Finance user with shares in 7th Level. "It just seems that any dog
stock that goes on the Internet will jump up."
Perhaps.
History has shown that because of the Internet's explosive possibilities,
companies can be rewarded with big profits and high stock prices for simply
having the right technology at the right time.
But that same potential also carries risks. And investors need to research
stocks picks carefully, experts say.
"I don't think people are doing the research," Yamner's Goldman said. "I don't
think people are actually sitting down and doing the research to figure out
what MARG does and what KTEL does."
Add to that the volatility of many stocks priced below $10, the influence of
Internet rumblings and good old fashioned greed and investors may have the
recipe for eventual disaster.
"People want the next big one. They start to look for it. But experienced
investors know that doesn't happen all the time," Goldman added.
Fernandez agreed.
The Los Angeles resident was new to day trading, starting just last week when
the Internet stocks started running amuck.
But unlike some of his peers, he never makes a purchase without performing his
own research, looking at a number of factors, especially news accounts.
"It's not like I am trading on just hype." Fernandez said. "Hype is part of
it. But there is a science to it."
(END) DOW JONES NEWS 04-22-98
01:08 PM-0- 1 08 PM EDT 04-22-98 |
