Hi Pals, got some good news got some bad news about internets, here's the good news first....
LOTS OF BUYERS, LOTS OF INTEREST IN THE SECTOR.
and the bad news is...
in TheStreet.com article 2/17 by Joe Bousquin: "Net Stock Summit: Cash Piles Up In Net Fund Coffers" - (just read it this morning)
larger part excerpts (can't forward link to here)-
"For mutual funds that invest in the internet, the cash just keeps rolling in. Problem is, Internet valuations are in orbit, and the funds' managers are having a hard time putting the cash to work. Still, none of the Internet fund managers we talked to have any plans to close their funds to new investors. Instead, they say they'll buy on dips and put the cash to work as the market corrects itself.
Take Ryan Jacob's Internet fund. As recently as mid-January, about 30% of the fund's 60 million in assets was sitting in cash because Internet stocks were priced too high. By Tuesday, his fund's size had doubled to $120 milllion in less than a month, though he has been able to reduce cash to about 20% in last weeks tech selloff.
At the WWW Internet Fund, the story isn't much different. Manager Lawrence York's assets soared from 2.9 million in November to $16 million earlier this month, before his portfolio suffered a series of blowups in the underlying stock.York says that at one point, he was close to having 20% of his assets in cash, with valuations too high for him to want to buy. The fund is currently 15% in cash, he says.
(other funds same situation etc. blah blah...)
As more and more mainstream money mgrs. seek internet exposure in their portfolios, managers who only target the internet are finding it more and more difficult to put their money to work. Those who can, like Munder Internet's Cook and Salerno, do so only by having a wider definiation of what constitutes and Internet company. Those who can't lend credibility to cricic's arguments that Internet stocks, while emerging as leaders of tomorrows economy, are stil too young and new to be a legitimate sector on which to base a mutual fund.
These managers say that's changing fast, though. The Internet fund's Jacob disputes the idea that there aren't enough pure Internet stocks in which to invest.
"Ithink the Internet encompasses a wide variety of sectors and gives us a broad mandate," Jacob says. Yet with its burgeoning assets and high cash position, could the fund be a candidate for closing to new investors?
"We're still a very small fund" Jacob says. "We're still a grain of sand on the beach here. Obviously, that's something you would have to consider doing down the road. At this point, we're far from that."
The fund is up 36.4% year to date.
Munder Internets Salerno says he and co-mgr. Cook have broadened their definition of Internet Companies to include those like Office Depot which may add to their revenues from the Internet. And when he wants to make a conservative play, he'll go into Oracle and Sun. That might explain why the fund is only 6% in cash.
The Internet as a sector currently is "too narrow, and in the future it will be too broad", says Salerno. "The concept (of the Internet) cannot be defined as one thing. It's too nebulous. It's just a new media space." At the same time, he says his fund isn't sitting on cash because that's not his job."
The way we see it, we're not paid to be an asset allocator to people. Their financial advisers will do that for them. he says "We are a high0-growth, tech-related fund. And higher growth means higher risk. We fit in that asset class."
Munder NetNEt is up 24.8% ytd. Salerno says Munder won't close the fund "if we can help it...we think we have the model that can scale."
Interestingly, York of the WWW Internet fund also takes a broader view toward the Internet sector, though his fund still had close to 20% in cash last month. Still, he claims his fund was the first to look at the potential of the Internet as encompassing companies that can make money off the network's infrastructure build-out needs and the business-to-business potential, as well as pure .com Internet Cos. In that respect, he thinks the Internet Investment landscape may soon go against a philosophy such as Jacobs.
"It is difficult to base a portfolio on small-cap start-up companies. York says. "I think we'll see him (Jacob) branching out and redefining what they're doing. Theat would be my guess. I think we'll see some of his pureness go away."
York's fund has returned 23.1% ytd. With his vision of Internet globalization, he doesn't plan to close the fund anytime soon."....
etc. (more in article).
Well, whsew pals, all I can say is that this explains to me once again why this sector is getting chewed up and devalued lately. Prices will never GO low enough to please these folks! And funds hate the splits, causes mucho problems for them if they're left holding onto 'em on the big day. These guys can't just hold on and wait for 'em to pop again like we can, they have stop loss rules they must follow & must undoubtedly comply with traditional investment models,
accountants, shareholders, and higher-ups to report and answer to,
complexities if they make too much money because too many want to cash the fund in at that time, etc.
This is the enemy to the volatility and valuations by which we profit.
These guys have the big leverage. The question is, will they craft a new strategy/investment outline to fit the Internet Sector, or will the sector's behavior be changed to fit their fund needs & status quo?
The answer is, I think, a little bit of both and to our detriment.
Like when the fences and villages were built in the West by The English. How much do these guys like to see more and more investors cashing in their growth funds to buy their own AOL shares after split?
They'll kill the buffalo & Indians & the goose that lays the golden egg, oh yes they will. But we still got plenty time to pan our nuggets. I think we can safely say "They got a long way to go til they catch up to Techride".
But we gotta keep a sharp eye on these boys now. They can do damage.
909 pals,
Joanie |
