Net Stocks Still Shine for Mitchell Rubin

During the Internet bubble we had dozens of small companies fighting for market share. But now we seem to be limited to talking about giants. In the end, will this be harmful for Internet growth?

I think there is a resurgence of smaller niche Internet companies that is really interesting. Fortunately or unfortunately, a lot of them get a little bit of scale and then get acquired. One trend that has emerged at our fund over the past couple of years is that our better small- and mid-cap ideas have gotten purchased. I would start with Barry Diller at IAC/InterActiveCorp(IACI - Cramer's Take - Stockpickr) buying three travel companies and a couple of media companies.

Do you have any smaller, niche names in your portfolio now?

We have a host of them. We own Homestore(HOMS - Cramer's Take - Stockpickr), which we think is a terrific business now that it has new management and has gotten over its troubles. Real estate to the Web is a waterfall trend where people use the Internet 60% to 70% of the time nowadays, instead of advertising in the newspaper. It's a potential acquisition candidate, but it's still growing as well.

We also own Monster Worldwide(MNST - Cramer's Take - Stockpickr), which is more of a mid-cap now, but it's become the dominant player in job postings worldwide. Then we own smaller companies like Netflix(NFLX - Cramer's Take - Stockpickr) and financial services companies like TradeStation(TRAD - Cramer's Take - Stockpickr) and optionsXpress(OXPS - Cramer's Take - Stockpickr).

There is absolutely no shortage of interesting medium and small Internet companies. You just have to be sensitive about the valuation and near-term prospects because it's still a volatile sector.