Sb, I made the press. I hope this causes more volatility.
>>Return on Internet-bookseller stock amazes investors, analysts, Wall Street
by Helen Jung
Seattle Times technology reporter
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No casino in Las Vegas or back-room poker game could touch the payoff that Ken and Bridget Loetscher have made from their hot gamble on Wall Street.
The Renton couple took $2,300 in savings last summer and bet it on Amazon.com, the Seattle-based Internet bookseller whose stock has defied gravity - and, some contend, logic - in its meteoric market climb.
In six months, Ken, a golf-course greenskeeper, and Bridget, a doctors' office manager, have turned their $2,300 bet into a $16,000 jackpot. They cashed out some of their stock a few months ago, but are holding their other shares.
"It is gambling," Bridget Loetscher said. "But we do a lot better at this than we do at the craps table."
The Loetschers, who are also gamblers in the traditional Las Vegas sense, aren't the only ones watching every roll of the dice. The favorite son of Internet stocks has lured investors from Marilynn Weinreich of Arizona, to Carl Hudecek of Ohio, to James Morris of Seattle to put down their money and see if their number comes up.
Amazon.com, founded in 1995, sells books, compact discs and videos over the Internet. Although it attracts millions of book- and CD-buying customers and its sales continue to rise, the company is deeply in debt and continues to spit out losses as it advertises and builds its business.
But many think Amazon.com is well-poised to lead the industry into the era of electronic commerce where the Internet becomes the retail channel of choice.
The company is focusing on gaining customers and becoming a household name, which may be the smartest strategic move it can make, said Henry Blodget, an analyst with CIBC Oppenheimer, an investment-securities firm. Profits aren't vital at this early stage in Internet commerce, he said. Besides, many companies - Microsoft included - are being traded at prices that some traditional measures might deem too high. "All the great stocks in history have been 'overvalued,' " he said.
The stock has consistently outperformed analysts' expectations. Since its debut on Wall Street in May 1997, the stock price has staged a 5,346 percent gain. As the price went higher and higher, the company issued two stock splits, increasing the number of shares while lowering the per-share price. In terms of market capitalization - the stock price multiplied by the number of shares in stockholders' hands - it towers over such established retailers as Sears Roebuck And Sears turns a profit.
Its success has meant a windfall for investors like Rex Carlson, an accountant in Lake Forest Park. He devoted $5,000 to the stock last fall when the stock was trading at $250 a share. He sold it on Friday on a hunch that the stock might cool down soon, making more than $12,000 in profit.
Amazon.com's losses are one reason for skepticism by those who say the company is overvalued. And many of those are betting that the wax on the high-flying stock is due to melt.
"Here's a company that has fantastic sales growth, but absolutely zero earnings," said Frank Blakeslee, head of the local chapter of the American Association of Individual Investors. "They're in debt up to their eyeballs. How in God's name can you ever convince yourself to invest in that?"
That point of view has brought out another kind of investor - investors who short the stock, which essentially is borrowing and selling shares at one price because they think the stock will fall. That will leave them with a profit after they pay back the borrowed shares at the lower price.
But so far, that has burned many an investor who sold the stock short.
"It's ridiculously overvalued," said Carl Hudecek of Toledo, Ohio, who expects to lose 5 to 10 percent of his retirement savings from betting the wrong way.
"It's a loss I can stand," he said. "I'm not happy with it, but I can stand it."
The stock's performance surprised veteran investor James Morris, a former high-tech-company executive who lives in Seattle and Carlsbad, Calif. He finally changed his investing strategy and dubbed Amazon.com "The Thing." .
"It's something that's never been seen before in the history of Wall Street," he said of the price, which seems to constantly grow like the blob of cinematic fame.
The gamble is enough to keep him glued to the television and his computer to track the latest chatter and action from what has become "the world's biggest casino" - despite sunny beaches outside his door.
"I love the volatility," he said.
Amazon.com's continuing rise also makes some investors who sold too soon a bit wistful.
Weinreich of Mesa, Ariz., has long been a customer of Amazon.com, and was eager to buy into the company after it went public. She had to cajole her stockbroker, however, who distrusted Internet stocks. Finally, she bought in at $30 a share and watched it rise until it hit $200 a share. Her stockbroker called.
"(She) was almost in a panic," Weinreich recalled. The stockbroker urged her to sell. "I thought, 'OK, she does this for a living, maybe I should listen.' "
Since it hit $200, the stock has continued to soar. "I haven't really talked to her since then."
As for the Loetschers, they plan to ride the stock even higher. They cashed out enough of the stock to cover their initial investment, Bridget Loetscher said, and now they want to see where this trip on the Internet will take them. The investment is for their retirement, and if the stock takes a hit, they won't be devastated.
"Nothing is gained unless you take risks," she said. "We don't have to have a yacht on the Mediterranean. We just want to enjoy life."
Helen Jung's phone message number is 206-464-2742. Her e-mail address is: hjung@seattletimes.com
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