Down 25% Past Week: ISDEX Scorecard After The Twister

Like a scene from the movie “Twister,” storm chasing around through
Internet stocks for the week August 25 through September 1 was akin to
watching flying cows (bulls perhaps) being taken in the funnel only to be
hurled into bear burgers on the other side.

ISDEX lost 25% of its value as
the storm showed signs–finally–of settling Tuesday when the group of
50 industry bellwethers posted a 7% gain.

Monday, August 31, was the real
suction sound causing ISDEX to fall a record 15% in one trading day. The
storm clouds began gathering July 20, however, as ISDEX began to slip
gradually from a July 7 spike reminiscent of the April “everybody loves
Internet stocks” party when ISDEX hit its all-time high of 185.66. That
means ISDEX as of September 1 is off 50% from its high.

Leading the
selloff was CMG Info (NASDAQ:CMGI) down 41% since August 25 to $42 per
share. Its sizable stakes in GeoCities and Lycos exposed it to the
volatility in those two stocks also, as did its stable of private
investments in Internet startups.

Still, we think CMGI represents one of
the best ways to invest in the industry in one stock. It’s like having a
public venture capital fund focused on Net firms. If you want to arbitrage
the value between private and public companies in this industry, CMGI
provides one of the few choices.

Of the overall industry bellwether index on Wall Street, Mecklermedia’s
ISDEX shows only two of the 50 on the plus side for the week of August 25
to September 1:
IP telephony service IDT (NASDAQ:IDTC) and VocalTec
(NASDAQ:VOCLF), an IP communications software maker.

Check the damage report, which may turn into a shopping list for investors
who wished they had bought in late 1997 to see the 180 to 186 ISDEX high
reached in April and July (also known as a “taking profit time”).

On the plus side, the newbie Internet IPOs, shown in Internet.com’s IPO
Index below, are up 43% as a group despite the mix of gainers and decliners
divided. Of all Internet IPOs, those that solved bandwidth bottlenecks
fared best.

>From its IPO pricing June 10 of this year to September 1 close, Inktomi
(NASDAQ:INKT) leads all comers at 185% run from its $18 per share.

INKT’s strength has been a two-fold product approach, search
wholesaling and network caching.

Broadcom (NASDAQ:BRCM) attacks the
broadband chip arena with a market leadership position selling its silicon
to the cable and telco firms for fatter access. Similarly, Exodus
(NASDAQ:EXDS) solves some bandwidth issues as a mirror site for major Web
services and sites.

GeoCities (NASDAQ:GCTY) holds potential as a consumer of that bandwidth,
with the millions of people using its service to publish their own Web
pages for free. The market for do-it-yourselfers is new but we think its
pioneering role could lead to earnings within two years.

Users count, they are one way of discounting ad and marketing revenue for
the future.
Also, we think the community/Websteader space may be a closer parallel to
real-world interaction than using just guides or search.

On the list of
decliners, a handful of e-tailers bit the dust from IPO price. E-tail margins
are thin to nil and we suspect Amazon (NASDAQ:AMZN) valuation could
continue to fall as that becomes more apparent.

Stormwatching fans are encouraged to check the weather on Internet
stocks as the storm came and went via these links:

Special ISDEX market moves coverage
recap:

ISDEX
all-time high and
low | ISDEX
weakens Aug 27 |
last Thursday initial plunge; market
close tally |

Monday
massacre
morning;
& then afternoon|
Top 10
decliners
Aug 31