Internet Investors In A Real Fight

Using round-by-round scoring, the past four weeks are a draw. Under the
point system, however, Internet stocks are trailing on all cards in their
latest bout with investor anxiety about overvaluations and rising interest
rates.

Let’s look at the action as measured by internet.com’s Internet StockTracker
weekly newsletter: Four weeks ago, Internet stocks rallied for the first
time since hitting the canvas in mid-March, as all 12 sectors tracked by the
newsletter posted gains. A week later, every sector fell back into the red,
only to reverse course again the following week with advances across the
board.

Then came this week’s bloodbath, in which the top-performing sector
Consultants/Designers lost 12 percent.

So that’s two up and two down, which is a lot better than the prolonged
freefall from mid-March through late April. Dig a little deeper, though, and
it’s clear that Internet stocks are still groping for the bottom.

After the first post-correction rally, in late April and early May, 47
Internet companies had gained in the previous month’s trading, a period that
covered most of the spring slump (or burst, if you prefer).

As of Wednesday, the number of monthly gainers among Internet stocks had
risen to 66. While encouraging, it also means the vast majority of ‘Net
tickers (82 percent) have lost ground during a period when the market has
twice rallied.

But go back just one week ago, and 147 Internet stocks more than twice
this week’s total were up for the previous month.

What it all means is that the bottom is near. Finding it, however, is a
messy process, with many stocks hitting new lows and then bouncing up
briefly, only to test the limits of its depths again. Look at any number of
individual stock charts Netivation.com,
PlanetRx.com,
OnlineTrading.com, HotJobs.com, ilife.com; there
just are too many to mention) and you’ll see this pattern.

Of course, reaching the bottom is one thing; regaining upward momentum is
another, and it may be several weeks or months before that happens.
Therefore, to return to our boxing metaphors, Internet investors must stop
hoping for a quick knockout (stock run-ups) and train to go the distance
(invest in long-term winners). If you’re disciplined, patient and pick your
spots, the knockouts will come.