|
Net Fund chief is cautious
|
 |
May 25, 1999: 10:01 p.m. ET
Some companies probably cannot justify their valuations, Jacob says
|
NEW YORK (CNNfn) - Many of this year's hottest Internet IPOs have taken a huge beating, trading well below their highest levels. In fact, the Dow Internet index plummeted 6 percent Tuesday alone. It is down 30 percent from last month's high.
Ryan Jacob, manager of The Internet Fund, has certainly suffered in all of that selling. Still his fund is up 93 percent on the year. He shared his opinions on Internet investing on "Moneyline News Hour With Lou Dobbs."
LOU DOBBS: This is a beating by any standard. How concerned are you?
RYAN JACOB, MANAGER, THE INTERNET FUND: Well, we have gone through periods over the last 12 months where the sector has retreated quite a bit. Probably a little bit more of a sell-off last summer, given some of the external factors we saw in the market, But, you know, people ...(have been thinking) that these stocks are going straight up, and that is clearly not going to be the case.
DOBBS: Well, straight up, sharply down -- I think we can call them safely high-beta stocks. At this point though, it looks like we are into something a little different. We are seeing across the Internet sector, the search-and-directory companies are getting hammered, the so-called "portal stocks," the ancillary stocks around them are getting hit -- is there anything in this as a trend?
JACOB: The underlying fundamentals for many of these companies are still very positive. Many of the companies that we own in the fund are still growing their businesses anywhere between 20 percent and 40 percent per quarter. You know, albeit it is more difficult to raise money in an environment where, you know, stock prices are more depressed. But these underlying businesses are continuing to grow at extraordinary rates.
DOBBS: We have also seen some concern about the growth of the Web itself over the last few months, particularly portal growth, where, as you said, we have been accustomed to seeing dramatic growth rates. Any reason for concern there, in your judgment?
JACOB: Well, I mean, clearly as companies do get larger, like an AOL or an Amazon, for instance, they won't be able to put up those kinds of growth rates and, for that reason, they should not enjoy, maybe, the kinds of valuations that they have had over the last year or two.
DOBBS: What is the influence here, in your judgment? Is there any influence in the fact that these Internet stocks, in particular, that the ancillary surrounding sectors as well are very narrow-float stocks out there.
JACOB: If the general market is weak, clearly it's going to be difficult for the Internet IPO market to continue to do well. And so with so many deals and registrations, that could put pressure on the overall market for Internet stocks. I -- again, I would say longer term, there is going to be maybe a little bit more seasonality in the business for some of these companies as they get more mature. They are still probably, for the most part, in the hyper-growth phase.
DOBBS: And your counsel, your strategy in this?
JACOB: Well, I mean, again, I would just caution investors to really look at what they're investing in, which, in the most part, are venture capital-type situations, high-risk, high-return scenarios where volatility is really part of the territory; and, you know, there is going to be periods where the stock will do well and periods when they're going to come back quite a bit, so, again, it's really part of the course. 
|
|
|
|
|
 |
|
