Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (8660)	12/21/1998 1:16:00 PM
From: Glenn McDougall	Respond to of 18016

*OT* But perhaps On Target Wrong! Dispatches from the Front: The Net Stocks -- on Fire for a Reason? By James J. Cramer 12/21/98 6:15 AM ET Here's one for all of you bears to ponder: How strong can the fundamentals be in some of these tech stocks for them to run like this? Inside-the-box thinking says that the market is just crazy and that Intel (INTC:Nasdaq) and Microsoft (MSFT:Nasdaq) should have stopped going up by now. But what if it turns out that the fundamentals are on fire? What if it turns out that the Net has energized everything and made it so that there are more tech purchases, both corporate and individual, than anybody expected? What if it turns out that the reason tech is going up is because the earnings are going to explode? How strange would this be? If you consider the rapid takeoff of the Net, you might be able to determine that that these stocks turned out to be cheap on next year's earnings. And you would figure that the move, frequently ascribed to short squeezes and a lack of better investment alternatives, is really just an anticipation of a major revision of earnings. It wouldn't surprise me. In the mid-'80s there was a tremendous hue and cry when Merck (MRK:NYSE) passed General Motors (GM:NYSE) in market value. How could the ultimate bricks-and-mortar operation be trumped by a pill maker? Same thing was said when Coke (KO:NYSE) topped both of these companies. I know in the age when Buffett endorses Coke, it seems weird, but the most fashionable trade among the intelligentsia at the time was to go long GM and go short Merck or Coke and bet they would have to meet! What a hoot!!! Later on in the early 1990s people marveled when tech started putting on its big market cap. The intelligentsia at that time said tech was cyclical and that anybody who invested in it for the long haul would get run over by the investors in pill makers and soda syrup. I always felt painfully alone at the time when I ventured that these stocks were going to become staples of portfolios. Now I think the same thing may be happening to investments in the Net stocks. First is a bit of empirical proof. I track the performance of new indices closely. A new index is usually a sign of a top in that segment. In fact, from the time that an index is announced to when it has options trading on it (usually a matter of a few short months) the index has almost always peaked! Not this time. The DOT jumped 50% from the time it was announced to when options traded, and it keeps going higher even now. Second is anecdotal. My wife always puts hints for presents on the steps on the way up to my third-floor office. Last night while going up to file this story, I saw an ad for eBay (EBAY:Nasdaq) she had ripped out from Art and Antiques with some suggestions and a note saying it is not too late to go online and get these. Last year my wife would not have even heard of eBay; now it joins Amazon (AMZN:Nasdaq) among the primary places that keep me out of the Short Hills mall. Finally, if you knew which money managers had big stakes in these stocks, you would go crazy! Every hot manager I know has giant positions in these things. Come the next year, do you think new money is going to go to the macro clowns who blew you up in the summer, or the hedge funds who derided the Net as they derided Intel and Coke before it? I don't think so. It is going to go to the hot hands, which is why I intend on pricing out some deep-in-the-money DOT calls today. First thing. Regards Glenn