Dot Com Bets

11/19/2004 12:00 am EST

Focus:

Several leading advisors are looking at renewed opportunities among the dot-com crowd. Here, we examine several favorite plays from Bambi FranciscoKen Kam, Jim Oberweis, and Price Headley , each focused on companies operating via online sites.

(For more on the advisors cited below, please click on their photos.)

Francisco, BambiCBS MarketWatch, in conjunction with InterShow, recently held its first investment cruise. One of the featured speakers was Internet columnist Bambi Francisco. Here, she provides a summary of her market analysis and top stock picks. "Advertising is going online, and it's going across a number of niche sites. One of the attendees asked me what a good investment would be, and I said that given the trend in advertising and media behavior of the younger generations, niche sites would be on the short list. Those worthy of checking out include iVillage.com (IVIL NASDAQ), the #1 site for content targeting women; Bankrate.com (RATE NASDAQ), whose properties ranked in the top ten financial Web sites; CNET (CNET NASDAQ), which ranked #15 across all Internet sites; PlanetOut (LGBT NASDAQ), a site catering homosexuals; and Shopping.com (SHOP NASDAQ), which ranked #1 across all Internet sites. The reason these sites would be attractive to stock investors is because they're attractive to marketers. The reason they're attractive to marketers is as simple as it obvious: Society is filled with self-indulgent, extremely individualized consumers who can now choose what media they want and when they want it. It's not a one-size-fits-all world. Better get niche."

Kam, Ken"Though you may not have heard of IAC/Interactive (IACI NASDAQ), you've certainly heard of some of their brands," says Ken Kam of Marketocracy . "The interactive commerce company consists of such well known names as Expedia, Hotels.com, Hotwire, Home Shopping Network, Ticketmaster, Match.com, LendingTree, Citysearch, and Evite, among others. The company has recently benefited from a strengthening online travel business, which helped them show a higher then expected third quarter profit. Subsequently, IACI has been one of our most heavily traded Meanwhile, our largest micro-cap value holding is also an operator of an Internet site. eDiets.com (DIET NASDAQ) is an online provider of services, information, and products related to nutrition, fitness, and motivation. In their latest earnings release, the company grew revenues 6% versus the same quarter one year ago."

Oberweis, James "A richly valued, but potentially exceptional growth story is Audible (ADBL NASDAQ)," says Jim Oberweis, editor of The Oberweis Report. "Its Audible.com Web site is the Internet's leading provider of downloadable spoken word audio, offering audio editions of books, newspapers, magazines, radio programs, and original shows. Available offerings include daily audio editions of The Wall Street Journal and The New York Times, as well as Forbes, Harvard Business Review, and Scientific American. Audible.com was recently named the best consumer Web service by CNET.com and one of the 'Best of Today's Web' by PC World . In the most recently reported second quarter ended June 30, Audible announced total revenue growth of approximately 82% to $8.1 million. Earnings per share in the second quarter grew to $0.01 from a loss in the year-ago second quarter. Our asset management clients own approximately 240,000 shares, and we consider the shares appropriate for risk-oriented investors."

Headley, Price "Overstock.com (OSTK NASDAQ), a small-cap online seller of 'closeout' merchandise, is a favorite of ours for the year ahead," says Price Headley, founder and chief analyst of BigTrends.com. "Though not yet profitable on the bottom line, Overstock.com has demonstrated an ability to grow sales at a 300% clip in the second quarter, though those revenues are just a fraction of that generated by bigger competitors. Still, the company appears to be moving in the right direction. Additionally, the company recently launched an auction service that appears to be gaining some traction. By other value measures and ratios such as price-to-sales and price-to-earnings growth, OSTK looks like a relative bargain. That might continue to pique interest in the stock, but investors will need to see real earnings in the not too distant future: That's when things could really get interesting. In October, the company reported that quarterly revenues rose 87% over the year ago quarter."

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