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MARKET SAVVY | SAVVY CONFIDENTIAL / A Briefing for
Investors

New Net Stock Warnings Issued Amid Tech-Heavy Nasdaq's Tumble

April 20, 1999|Times Staff and Wire Reports

Analysts sounded warning bells Monday as the Nasdaq composite fell 5.6%--the third-biggest drop this decade in the technology-heavy index.

* "The bubble has just burst" in Internet and computer shares, said Edgar Peters, chief investment officer at Panagora Asset Management Inc. "It would take phenomenal growth in those companies to justify their current prices."

* Morgan Stanley Dean Witter analyst Mary Meeker warned in an interview in the New Yorker that Internet shares may suffer "a big correction" this year. She said only "handfuls" of companies will succeed long term. Meeker's interviews can move stocks; in February, Yahoo, Amazon.com and EBay soared after she called their long-term outlook "phenomenal."

* Wharton School finance professor Jeremy J. Siegel also rained on the Net parade with a guest column in the Wall Street Journal under the headline "Are Internet Stocks Overvalued? Are They Ever." "The Internet is a communications revolution," he wrote. "But the very accessibility that has made it spread like wildfire limits its ability to create premium profits."

Ameritrade and EarthWeb were among the hardest-hit Net stocks Monday, both plummeting more than 30%. Mutual funds investing heavily in tech stocks fell 5.8% on average, according to Bloomberg Fund Performance.

The biggest U.S. technology stock fund, the $6-billion Seligman Communications & Information Fund, fell 4.5%, and the second-biggest, $5.6-billion T. Rowe Price Science & Technology, dropped 3.2%.

The worst performer of the 10 biggest tech funds was Invesco Strategic Technology, down 8.4%.

But the average tech fund was up 20.7% this year before Monday's plunge, noted Russel Kinnel, Morningstar Inc.'s chief equity fund analyst. He sounded less alarmed than some.

"You figure it was time for a breather," Kinnel said.

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Off Line

Internet stocks suffered a widespread sell-off Monday as investors continued to dump tech stocks in favor of cyclical shares. Among the hardest-hit Net stocks:

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Stock Ticker 52-wk high Mon. close $ chg. % chg Ameritrade AMTD $188.38 $87.88 -$38.13 -30.3% EarthWeb EWBX 89.00 44.50 -19.25 -30.2 VerticalNet VERT 143.38 80.00 -31.00 -27.9 InfoSpace INSP 141.00 85.75 -30.50 -26.3 Inktomi INKT 159.13 89.00 -29.50 -24.9 DoubleClick DCLK 164.50 104.00 -34.06 -24.7 Autobytel.com ABTL 58.00 27.13 -8.88 -24.7 Infoseek SEEK 100.00 45.63 -14.88 -24.6 Excite XCIT 187.88 108.50 -30.88 -22.2 America Online AOL 175.50 115.88 -23.88 -17.1 Amazon.com AMZN 199.13 158.94 -31.06 -16.3 Yahoo YHOO 244.00 163.69 -25.50 -13.5 EBay EBAY 195.00 154.13 -21.88 -12.4 Charles Schwab SCH 155.00 102.00 -12.81 -11.2 S&P 500 SPX 1,362.38 1,289.48 -29.52 -2.2

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Source: Bloomberg News

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