Hot & Not '98:ISDEX Sees Rollercoaster Year End Big
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1998 was the year Wall Street finally "discovered" the Internet. The stats tell the story well. ISDEX began 1998 at roughly 100 and ended the year to December 29 up more than 208% as buying and selling Internet stocks became front and center for the everyday investor. Day traders swept up the speculative shares in whirlwinds of dust clouds and hype as the year waned, looking for an undiscovered gem or trying to catch the latest rising and often falling star at the fringe of the Internet landscape.
ISDEX Year To Date Results
|ISDEX ®||29-Dec-98||% change||Point change||% change|
|The Internet Stock Index||close||from||from||from|
|or from IPO*|
|Security First Technologies||SONE||$34.38||16%||$4.63||374%|
Our abacus tweaking reveals that of the 50 stocks in ISDEX, all but three ended the year on a positive note. Forty of the 50 stocks beat the Dow and NASDAQ hands down, outpacing the industrial-era and PC-era stocks in a race now moving in Internet time where a second is sometimes a year.
Most observers say that the Internet mania will end in 1999 but we expect some healthy corrections in some of the sector and a renewed interest in other parts.
AOL-pending acquisition Netscape raised the ante for everyone and we think AOL is the one to beat in 1999. That doesn't mean we endorse AOL stock running like wildfire and consider its current valuation approaching our estimated intrinsic value for the company given its current outlook.
Network Solutions (NASDAQ:NSOL) ran on its monopoly status and running head start as domain name registrar. Its challenges we see may be in maintaining its central grasp of addressing if or when real names or natural language type in addressing arrives.
Microsoft or Netscape could blow out the meaning of a lot of ".com" if you can simply type in "stock trades" and have the URL deliver an array of eager brokerages. Network Solutions has invested in a startup called Centraal to mitigate some of this. But owning the browser--as Microsoft and AOL-Scape do/will--is a far better position in our view. Browsers still matter, despite the fact they are "invisible" to users.
Ad networks like DoubleClick (NASDAQ:DCLK) and 24/7 (NASDAQ:TFSM) rode the year well following strong IPO aftermarket burners. Each had triple digit percent gains. Privately-held LinkExchange sold to Microsoft (NASDAQ:MSFT) so watch for the heat to get turned up here next year.
Of all the e-commerce enablers Broadvision (NASDAQ:BVSN) stands out with its rise to prominence, up 418%, despite a rollercoaster dip. The targeted marketer software maker hit the right note with advertisers wanting more clickthrough and focus in the increasingly noisy ad space. BVSN rival Open Market (NASDAQ:OMKT) disappointed Wall Street with a 35% rise year to date.
Security software has been the dogs of Internet stocks all year, except for Axent (NASDAQ:AXNT) with its 79% runup. But the biggies of just one and two years ago, Security Dynamics (NASDAQ:SDTI) and Check Point Software (NASDAQ:CHKPF) have done little to move all year. A lesson in how leaders can go 1) unnoticed and 2) can run to stand still. In our view one of them should have rolled up the security sector into a nice solution provider offering, a one-stop security solution.
The only other dog, chihuahua-class in its stock movement all year, looks like IP telephony. Apparently the cost savings alone isn't yet enough reason for Joe and Jane Browser to use it.
Maybe it's the outside threat that the browser could place an icon on it for one-click calling? Or the AM-radio sounding talking back and forth just doesn't compare with point to point calls the old-fashioned way. The area may be out of favor in 1998 yet there seems to be a lot of potential here under the hood if it can just click with consumers and businesses.
Tomorrow we tally our top 10 stocks we've watched this year to see where they ended this amazing 12 months of adrenaline and rollercoasters where Wall Street meets the Web.
Through December 21, Steve Harmon's top 10 Internet
stocks to watch in 1998 were up 350%...for 1999 Steve Harmon's Hot Stock
Watch will be available as a monthly e-newsletter. It will feature analysis
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