What makes the market different from the prior bear market is that these speculative companies that are attracting the best hedge funds as investors are markedly different than the cybers of yore. They have real assets, real cash flows and ultimately provide a buffer to any serious market pullback.
And what happened to the cybers?
Didn't there used to be a whole bunch of large public companies that had the prefix "cyber" in them? Like whatever happened to that great company, Cybernet Internet Services (ZNET - commentary - Cramer's Take) that provides Internet connectivity services. In 1999, it did a $150 million high-yield bond offering led by Morgan Stanley and Lehman Brothers. Today, it traded 580 shares for 1.9 pennies a share. Where did that $150 million go?
Or how about Cyber Digital (CYBD - commentary - Cramer's Take)? It wasn't enough to be "cyber." It had to be "digital" also. The company, at 32 cents a share and with a $5 million market cap, recently announced that it placed a $103 million value on its CTSX system. The company did an analysis based on a comparable transaction, and J.C. Chatpar, president and CEO concluded, "Therefore, we believe that our CTSX system could be valued at $103 million. Yet, our current market cap is only $5 million, based on approximately 22 million shares outstanding at current stock price." Fascinating.
The other day I was reading an online piece from October 1999, called "VC Buzz." That day, Oct. 6, 1999, $211.4 million worth of VC deals were announced. And that was a slow day. Just in case they missed something, at the end of the article they asked, "Do you think your cool company ought to be featured in a VC Watch column?"
Investing Activist Track: Chapman Takes On Texas 6/9/2006 1:59 PM EDT Chapman Capital is back, and its 13-D filing on Carreker tells a bullish tale in vicious fashion.
Investing Why I Don't Like Preferred Stock 6/9/2006 11:11 AM EDT Quanta Capital's preferreds don't carry even the usual limited benefits of these instruments.
James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.
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