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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: ChinuSFO who wrote (5332)	2/21/1999 1:27:00 PM
From: Steve Robinett	Read Replies (2) \| Respond to of 41369

Chinmoy, You comment on the recent Nasdaq slide that you see it as profit taking. Okay. Whatever. AMAT, for example, moved from the low 20s to the mid-60s, very quickly discounting a turnaround in the chip equipment companies. One would expect profit taking. Why that money or any Nasdaq profit-taking money would necessarily go to AOL is beyond me. You comment, After AOL splits at start of business on Tuesday 2/23, it would present these investors with a buying opportunity. They would view the split as a drop in stock price by half. To a prospective first time buyer of AOL, the split is NOT as complicated as "nine 1 dollar bills....." as outlined in your post As I said before, if you believe 2 shares at $80 is worth more than 1 share at $160, I will be happy to sell you nine one dollar bills for only one ten dollar bill. After a split, the price per share is less, the number of shares is greater--the value of those chunks of stock is identical and AOL's share price, IMO, has gotten a long way ahead of fundamentals like cash flow. The stock has doubled in the last three months--for heaven's sake. It is selling at several hundred times free cash flow. I know these concepts are alien to most people on this thread but they are not alien to professional money managers. Speaking of whom (money managers), you comment Thus far AOL has been the darling of small investors like you and me. The big funds got into AOL on or after Jan 1, 1999. (S&P 500) So the big funds will jump in at or near the post split price, expected to be around 75 to 85... Not true. AOL is currently 75% owned by insitutions yahoo.marketguide.com Index funds own stocks in proportion to their weight in the index--obviously--and the S&P 500 is a capitalization-weighted index. Splitting AOL 2:1 in no way changes its market cap, ergo and duh, a split in no way encourages an index fund to buy or sell. Best, --Steve