Investors stick with Internet leaders

Summary:In what's shaping up to be the second-worst trading day in Nasdaq history, investors are getting out of the volatile Internet sector in record numbers. But while investors are bailing on the newbies to the market, they are sticking with the leaders such as America Online Inc.

In what's shaping up to be the second-worst trading day in Nasdaq history, investors are getting out of the volatile Internet sector in record numbers.

But while investors are bailing on the newbies to the market, they are sticking with the leaders such as America Online Inc. (NYSE:AOL), Yahoo! Inc.(Nasdaq:YHOO) and Lycos Inc. (Nasdaq:LCOS).

As a whole Internet stocks were having a rough day as the @Net index lost more than 16 points. Recent IPOs really felt the pain. Cyberian Outpost Inc. (Nasdaq:COOL) and 24/7 Media Inc. (Nasdaq:TFSM) were down 15 percent and 17 percent, respectively.

"First of all, Internets are -- with few exceptions -- risky investments," said Don Collier, an analyst at ProLytix Corp. "When you have a major correction like today, there's an strong urge to get away from stocks that have yet to prove themselves. Its a matter of reducing your exposure."

This isn't to say that more established and widely held Internet stocks are still safe. Yahoo! was off 5, or 5 percent, to 91 7/8 while AOL and Amazon.com Inc. (Nasdaq:AMZN) shed 6 1/16 and 7 1/4, respectively.

"It's not good for anyone today, from Internets to PCs to networking stocks," Collier said. "But when there's a sell-off, the little guys feel it most."

Surprisingly, some of the newer Internet stocks managed to hold up against Thursday's selling barrage.

Broadcast.com Inc. (Nasdaq:BCST) was off only 2 1/12, or 5 percent, to 51. Digital River Inc. (Nasdaq:DRIV), which had yet to fulfill its promise, was unchanged at 8 =. But both stocks could face tough sailing in future trading sessions.

"For Internet stocks a correction of 15 percent isn't enough with the speculative pricing," said Lawrence York, manager of the WWW Internet Fund. "There's no way to justify the $6 billion valuation on Amazon.com. Some of these stocks could correct 50 percent or more."

Geocities Inc. (Nasdaq:GCTY), which made a sizzling debut, was off 2 15/16, or 10 percent, to 28 5/16 after rocketing up to 51 3/8 in its first week of trading. That tremendous gain pushed its market capitalization to almost $1.5 billion. Less than a month later, its market value is down to $883 million.

"The market was asking the public investor to fund pre-IPO type companies," York said Internet stocks aren't dead, but "it will be a volatile ride."

Among other widely held Internet offerings, Excite Inc. (Nasdaq:XCIT) fell 4 7/16 to 34 15/16 after a Wall Street Journal article undressed the search engine firm for its accounting gymnastics; Infoseek Corp. (Nasdaq:SEEK) slid 2 MSPG) shed 3 15/16 to 35 and EarrthLink Networks Inc. (Nasdaq:ELNK) sank 3 3/8 to 37 > in early afternoon trading.

Larry Dignan contributed to this report.


Source: Inter@ctive Investor

Topics: Amazon, PCs, Start-Ups

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