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"All that glitters is not gold," Shakespeare warned us many centuries ago. Not so, say dedicated Internet stock investors who claim there is "gold" in the glitter of Internet investing. If their premise that the Internet offers a major shift in the way commerce will be conducted in a global marketplace is correct, the 21st Century should prove that they were not buying "salted mines" with their "speculative" investments in these high flying stocks. For those who have stayed on the sidelines up to now, but would like to add Internet investments to their portfolio, here are a few ideas to start. And, in keeping with my long-standing tradition of not promoting any particular investment, I provide this information without endorsing any stock or mutual fund by name. The mention of several household name stocks as examples should not be construed as recommendations. At the infrastructure level of the Internet, investors can select from a number of companies whose business is providing equipment, software, and transmission capabilities. Examples of companies in these categories include Microsoft, Cisco Systems, Dell Computers, AT&T, and Bell Atlantic. The growth and increased usage of online services will benefit this sector through the increased purchases of goods and services. The next layer of investing includes companies selling goods and services directly to the consumer over the Internet. Pure e-Commerce companies such as Amazon.com have attracted the most attention. Today one can find a wide variety of products, services, and gifts for sale on the Internet. The attractiveness of these companies relates to their ability to sell anywhere worldwide and that their products or services have appeal and can be delivered. At this level shareholders should be looking for companies that can deliver profits in excess of their product costs. By increasing volume, profits and earnings should increase, causing stock prices to rise. To date, profits have not been abundant in this sector as these companies have been investing considerable sums back into advertising costs as they attempt to stake out greater market shares as a way to gain competitive advantage over the proliferation of copy cat businesses. The last layers of Internet investments are the content companies. Their business is attracting users for little or no charge. Their business is selling advertising. Unlike the e-Commerce layer, their profit potential is unconstrained by raw material, manufacturing or distribution costs. In the long run, these companies have the greatest potential for profitability, which goes a long ways toward explaining the pricey valuations given by the stock market to AOL, Yahoo, and more recently Excite. For those unwilling to pay $300 or more for a share of stock, there are now several load and no-load mutual funds whose investment policy is to invest in Internet and Internet related stocks. These funds generally contain a variety of stocks ranging from companies providing infrastructure to those more directly identified as Internet companies in e-Commerce and content related web sites. |
