DOT COM part 2?
By David
Fishman
Over the past few
months Internet stocks have been insanely
hot. It almost feels like we're back in the
DOT COM boom. With the election over and
Bush staying in power what does this mean
for investors and for the financial side of
the Internet industry. It may not be clear
but a great deal of funding for our Internet
ad space is provided through publicly traded
companies.
https://www.lynxtrack.com/signup.php
Following a
Presidential election and a sector with as
much momentum as the Internet, many investors
may be looking to put some money into mutual
funds that focus on the Web.
Well, good luck
finding one. The number of funds in this
sector has been steadily declining from 44 in
1999 – the pinnacle of the Internet craze – to
only 10 today. Lipper Inc., which tracks the
performance of mutual fund sectors, doesn't
even have an Internet fund category. It simply
throws these funds into a broad technology
category.
Lipper has never put
these funds into its own category. Which may
tell us they do not believe Internet funds
will last on their own. In fact history tell’s
us just that. These funds do not historically
stand a chance at being around in the long
term.
After the collapse
in 2000, most of the funds either completely
changed their strategy or sold everything off.
With the IPO of Google Inc. and Yahoo Inc.
showing growth over 100% the Internet based
stocks as individuals are bubbling with
positive momentum.
Yahoo, for example,
climbed from about $10 in early 2003 to its
current level of about $36. And Google soared
from $85 in its August debut to almost $200.
Similarly, some of the Internet funds that
invest in these stocks, such as the Jacob
Internet fund or the MunderNetNet fund, have
reported similar increases in their net asset
value.
But investors are
not throwing a lot of money into these funds.
The decline and burst of the DOT COM bubble
have kept investors cautious. So while
companies like AOL are posting growth in
Internet ad sales numbers, investors are
acting very cautious. This results in slower
than hoped for overall growth of the Internet
advertising world.
As a review
of funds in the online industry the Dallas
/online forum shows “assets in the Munder
fund, which topped $10 billion in early 2000,
now measure less than $1 billion. The Jacobs
fund saw its assets plummet from $248.7
million in 2000 to $20 million in 2001. The
fund currently has $90 million in assets after
the 100 percent gain in 2003 and some inflow
of new money.”
Typically, when a
sector catches fire as the Internet sector has
in recent months, several new mutual funds
will spring up to take advantage of the
renewed interest. Recently, we have not
witnessed this type of growth.
Part of the reason
is that it's difficult today even to define an
Internet stock, let alone a mutual fund that
invests in the Internet.
No matter how they
define it, all these fund managers agree that
the popularity of the Internet and the amount
of advertising dollars spent there will
continue to increase. About $8 billion will be
spent on Internet advertising this year – less
than 3 percent of all advertising dollars.
Hopefully the Presidential election will
continue a strong growth in the Internet ad
industry.
David Fishman
dfishman@wrpmedia.com
