Whast value? Lawrence, you should have twisted my arm harder when you recommended EGRP and NITE.
Two quotes from the article below sum up the correlation between price and value--
''It took 23 years to get the market (value) of AmeriTrade to $1 billion, and a week to get it to $2
billion: It's incredible,'' Ricketts said in a telephone interview. ''And after the last couple of days, it's
closer to $3 billion.''
''The valuations have become entirely disconnected from any rational analysis of (the companies')
prospects,'' said analyst Jim Marks of Deutsche Bank Securities. ''They're caught up in the Internet
valuation tornado.''
FOR PERSONAL USE ONLY---
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biz.yahoo.com
Monday February 1, 7:48 pm Eastern Time
Internet craze creates another Omaha
billionaire
By Jack Reerink
NEW YORK, Feb 1 (Reuters) - An obscure brokerage executive
from Omaha has landed next to legendary investor Warren Buffett
on that Nebraska city's very short list of billionaires, swept there by the stock market's infatuation
with the Internet.
The Internet craze on Monday turned AmeriTrade Holding Corp. (Nasdaq:AMTD - news), a sleepy
Midwestern discount brokerage just a few years ago, into a $3 billion company, and made its
long-time chief executive, Joe Ricketts, a billionaire.
AmeriTrade, now the nation's sixth-largest cyberspace broker, has watched its share price soar
tenfold in the last four months. The stock on Monday rocketed 31 percent to close at a record $105
on the Nasdaq.
Unlike Buffett, who built his fortune by making long-term bets on blue-chip companies such as
Coca-Cola Co., Ricketts shot into prominence because of the rapid-fire trading the Internet allows.
Drawn by rock-bottom commissions, investors funneled a record 340,000 trades a day through the
Internet in the fourth quarter, up 34 percent from the third quarter.
The surge in Internet trading has been driven by small investors, who -- unlike Buffett's buy-and-hold
strategy -- furiously buy and sell shares of companies that do business on the Internet, such as
bookseller Amazon.com Inc. (Nasdaq:AMZN - news). Of late, the facilitators of this trend --
cyberspace brokers -- have seen their own shares catch fire.
''It took 23 years to get the market (value) of AmeriTrade to $1 billion, and a week to get it to $2
billion: It's incredible,'' Ricketts said in a telephone interview. ''And after the last couple of days, it's
closer to $3 billion.''
The stock's surge has been a boon for Ricketts, who owns a majority stake in the discount
brokerage he started building in 1975. Ricketts, 57, and his wife Marlene together now are worth
around $1.7 billion on paper.
Ricketts is not the only brokerage executive to profit from the Internet craze.
Cristos Cotsakos, chief executive of E*Trade Group Inc. (Nasdaq:EGRP - news), the No. 3
Internet brokerage, currently is worth more than $200 million, thanks to his company's soaring stock
price. E*Trade shares have increased 13-fold in little over four months, and added another $7.25 to
a record $62.44 on Monday.
Charles Schwab, founder and chairman of the brokerage that bears his name, has stock worth close
to $6 billion. The market value of Charles Schwab Corp. (NYSE:SCH - news), the nation's largest
discount and Internet broker, has more than tripled in the last year to $29 billion. That's just $1 billion
shy of the market value of the world's largest securities firm, Merrill Lynch and Co. Inc.
(NYSE:MER - news).
Analysts differ on whether Internet brokerage stocks -- and wealth of their chiefs executives -- can
keep rising.
''The valuations have become entirely disconnected from any rational analysis of (the companies')
prospects,'' said analyst Jim Marks of Deutsche Bank Securities. ''They're caught up in the Internet
valuation tornado.''
Indeed, investors appear to disregard the huge difference in Schwab and Merrill's sizes in valuing the
firms. Merrill last year earned $1.3 billion -- four times as much as Schwab's $349 million -- on
revenues of $17.5 billion, versus Schwab's $2.7 billion in revenues. The company employs about
three times more brokers than Schwab's 6,500. Merrill, however, does not yet offer Internet trading.
''The fundamental question is, should these stocks be valued in a traditional broker sense or do they
deserve their own, new Internet-economy valuations?'' said analyst Steve Franco of Piper Jaffray. ''I
would say it's somewhat of a hybrid, but I'm certainly weighing more toward the Internet valuations.''
Compared with Amazon.com, Internet brokerages are cheap because they have profit margins three
times as high as the bookseller's margin, Franco said. ''There are a lot of efficiencies to be gained in
an Internet-centric operation, which is what all these companies are embracing,'' he said.
Copyright © 1999 Reuters Limited.
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