RealTime IT News

Infrastructure, Security Only Bright Lights Among 'Net Sectors

With little more than one quarter of trading left in the year, it's now clear that even the strongest of fall rallies will leave the vast majority of Internet stocks in the red.

Only 27 of 293 'Net stocks, or a paltry 9.2%, that have been trading since last Dec. 31 are up through Tuesday's market close.

Clearly there has been plenty of pain to go around. But it has not been distributed evenly across all sectors. While four contain no gainers at all, two sectors - Speed/Bandwidth and Security - include nearly half the 'Net stocks that have managed to advance this year.

Eight of the 20 Speed/Bandwidth stocks trading all year through Tuesday have gained, and a ninth - CacheFlow - is down only 2.2% and rising fast in recent weeks.

Meanwhile, five of 13 Security stocks are in the black for the year to date through Tuesday.

Let's look at the raw numbers for each sector:

Sector                   # Stocks Up    # Stocks Down    Pct. Gaining

Speed/Bandwidth               8              12              40%
Security                      5               8              38%
Wireless                      2               5              29%
Performance Software          4              30              12%
E-commerce Enablers           4              36              10%
Consultants/Designers         1              11               8%
ISPs/Access Providers         1              23               4%
Internet Services             1              34               3%
E-tailers                     1              34               3%
Search/Portals                0              10               0%
Financial Services            0              13               0%
Advertising/Marketing         0              15               0%
Content/Communities           0              35               0%

Several things are clear - some painfully so - from the above list. First, investors continue to put a premium on sectors that address bandwidth and infrastructure concerns, thus the relatively strong performance of Speed/Bandwidth and Wireless.

Second, just as the market knows you can never have enough bandwidth, so too it understands you can never have enough security. Because of this, I believe investors will continue to favor these sectors over other 'Net groups.

Third, even for the most highly touted sectors, success can be fleeting. Last year it seemed as though investors could randomly pick any B2B e-commerce stock and come out ahead. If they did so this year, they would have only a one in 10 chance of turning a profit.

Fourth, those sectors heavily reliant on advertising revenue - E-tailers, Search/Portals, Advertising/Marketing and Content/Communities - have exactly one gainer between them (online auction gain eBay ) and 94 losers.

Such is the Internet landscape, circa 2000.