Although their stocks have been on the outs since the tech bubble burst four years ago, a new generation of Internet company stocks is gaining popularity.
"All of us took more risks [in the late 1990s] than we should have," said Ryan Jacob, portfolio manager of the Jacob Internet Fund in New York. "Today, investors are much more scrutinizing, and it is a much more rational environment."
This new optimism is based on the fact that private firms are once again pouring money into Internet-related companies, which means a slew of hot IPOs could soon follow.
"Finally, venture capital firms feel like they can make money again on these companies," said Michael Greeley, a general partner at IDG Partners, an early stage venture capital firm in Boston.
And there's money to be made. Google, for example, started at $85 a share went it went public last year and now its stock is trading at $400 a share. Although Google's story is awfully unique, Linda Killian, portfolio manager of the IPO-Plus Aftermarket Fund in Greenwich, Conn., is investing in more Internet stocks.
"I have found a couple of Internet companies I like," she said. "But I remain very wary of the space; I am extremely selective; and I want to see profits in these companies."
As Killian suggested, some companies in the sector still behave like dot.coms did in the late 1990s. For instance, Baidu, a Beijing-based search engine that hypnotized Wall Street when was hailed as the next Google, watched its shares soar from $27 to $122 in the first days of trading. It gave the company a market value of $4 billion, although it was barely profitable. Its shares now trade at about $70 and its market value is much more realistic, around $1.6 billion.
On the whole, however, Wall Street and venture capital seems to have learned its lessons.
"I think average investors are still very cautious about the Internet," Greeley added. "They want to see companies of a certain size and maturity before they invest. I don't think there will be a bubble again."
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.