E-Mailbag Monday: Derivative Securities, Barnesandnoble.com, HealthGate

I’ve heard the phrase “derivative security” several times. What does it
mean?

Reply: As the name implies, this is a security that derives value
from another security. For example, a call option is derived from the value
of a stock that trades on an exchange. The call gives an investor the right
to buy 100 shares over a three month period at a stated price. However,
derivatives can be very complex and risky.

Payback

Barnesandnoble.com seems to be doing much lately. How do you rate them?

Reply: I’ve been a long-time fan of barnesandnoble.com (BNBN)
. Yet, the stock has been a virtual dog. But I’m still hopeful. I think
a major trend for 2000 will be the convergence of brick-and-mortar and the
online world — and barnesandnoble.com is a sterling example of this.

In the fourth quarter, the company’s sales more than tripled — about $81.5
million (up from $25.9 million in the same period a year ago). For the year
of 2000, the company had $200 million in sales, compared to $61.8 million
last year.

The company has built an incredible infrastructure of branding,
distribution and technology. Unlike Amazon.com, barnesandnoble.com is
supposed to report a loss that’s within analysts’ estimates.

Morevoer, last week barnesandnoble.com announced a deal with Microsoft to
build an online store that allows users to read books straight from their
computers, using Microsoft’s new Reader software.

IPO in the Emergency Room

What are the chances for the HealthGate Data IPO?

Reply: In January do not expect much from IPOs. And, yes, HealthGate
Data plans on doing its IPO in January. Interestingly enough, the company
filed its IPO on April 23, 1999, which is a long-time to be on the IPO
calendar. Just like bread, keeping an IPO on the calendar too long can make
things stale.

HealthGate Data is an online health care company. True, healthcare is large
and there is room for several online healthcare companies. However, I think
HealthGate Data is too late. There are so many other stronger companies —
that are already public. I think the best play is Healtheon/WebMD (HLTH)
. I also like drKoop.com (KOOP)
as a speculation.

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