International Internet Plays

01/24/2003 12:00 am EST

Focus:

Kevin Kennedy

Publisher, Coolcat Explosive Small Cap Growth Stock Report

The Coolcat Explosive Small Cap Growth Stock Report was ranked by the Hulbert Financial Digest as the #1 newsletter for 2001 with a gain of 77.7%. Editor Kevin Kennedy uses proprietary screens to isolate high momentum and breakout situations. His latest trio of picks are international Internet operators, covering Israel, India, and Asia. 

Kevin Kennedy was among the first advisors to recognize the potential of Chinese Internet portals, a sector that has recently shown very strong upside momentum. For example, Netease.com (NTES NASDAQ) first appeared on the Coolcat buy screens at $2.01 in August and Sohu (SOHU NASDAQ) was a buy at $1.50. Netease is now over 17 while Sohu is above 9. Kennedy no longer recommends either stock. 

Says Kennedy, "The three stocks below are now my top current picks. Although I expect them to be volatile up and down in the short term, I think patience will ultimately be rewarded with much higher prices. I'd sell some into price spikes while holding a core position and adding back sold portions on price pullbacks.

"Pacific Internet (PCNTF NASDAQ) is Asia's largest independent ISP by geographic reach with a direct presence in Singapore, Hong Kong, the Philippines, Australia, India, Thailand, and Malaysia. Pacific Internet delivers a range of end-to-end Internet access and value-added services. The company has been an industry leader in the gaming business in Singapore since 1997, providing online games through its Pan Asia Gaming Network. In its last quarterly earnings report issued in November, Pacific Internet notched its third consecutive profitable quarter. Broadband access revenue grew to $6.2 million, more than double the same quarter last year.

"Internet Gold (IGLD NASDAQ) is a leading Internet service provider in Israel in number of subscribers based on recent surveys. The company provides a wide array of Internet services tailored to the needs of residential and business subscribers, including Internet access and related value-added services, as well as content through portals. The company operates the leading portal in Israel through its MSN Israel joint venture with Microsoft and is a leading e-commerce provider in Israel through its e-commerce joint venture, Gold Trade. The company provides Internet access through a nationwide network with eight points of presence, enabling the entire Israeli population to access the Web via local phone calls.

"Rediff.com (REDF NASDAQ) is the premier online provider of news, information, communication, entertainment, and shopping services in India. Known for being one of the first with news and providing accurate and trustworthy information, Rediff.com provides an ideal platform for Indians worldwide to connect with one another online. Founded in 1996, Rediff.com is headquartered in Mumbai, India.

"Momentum investors are searching for Internet stocks that might ride the wave of Chinese Web plays. We note that the Internet plays listed above trade at much lower price to sales ratios than the Chinese portals. For example, Netease.com now trades at more than 25 times sales. Rediff trades at 4.4 times sales, while Internet Gold trades at just 1.2 times sales and Pacific Internet trade at less than 1 times sales. Thus, on a valuation basis these stocks could have more room on the upside. Although they won't rise in a straight line, I think all three stocks will eventually go much higher."

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