Revisiting the Internet Forever Portfolio
Reader: "How has the Internet Forever Portfolio been doing?"
Answer: Very well.
On Nov. 8, I suggested that the passive investor needs only to invest in a diverse set of Internet stocks to achieve better-than-average returns. The theory is that the Internet economy will continue growing in double digits for as far out as we can see, as online advertising goes from 1% of advertising budgets to 80% and online commerce goes from 3% of retail sales to 50% of retail sales over the next 20 years. (The growth potential of the Internet underscores the approach I take to selecting stocks for TheStreet.com Internet Review newsletter --
.)
I also pointed out in that article that current indices supposedly representing the Internet were inadequate because they included hard-core tech stocks like
Juniper
(JNPR) - Get Report
and
F5 Networks
(FFIV) - Get Report
, as well as software companies like
BEA Systems
(BEAS)
and
Tibco
(TIBX)
.
These companies are certainly related to the Internet, but they are not directly correlated with the success and failure of the Internet economy, which has matured into its own force of nature since those indices (such as the Amex Interactive Week Internet Index) were first created.
From Nov. 8 through Thursday's close, the Internet Forever portfolio has returned 5.74% vs. 2.91% for the
Dow
, 4.81% for the
Nasdaq
, 4.62% for the Russell 2000 and 4.1% for the
S&P
. On a monthly basis, the Internet Forever portfolio returned 4.15% in November (starting on Nov. 8, when the article came out), 1.57% in December, and is up 3.02% so far in January, establishing sector leadership this year.
The best performance came from mobile content provider
Jamdat Mobile
(JMDT)
, which has made a 44% move up since it agreed to be acquired by
Electronic Arts
(ERTS)
. The Chinese Monster.com,
51Job
(JOBS) - Get Report
, was second with a 29% return.
Altogether there were 21 winners and nine losers, with the worst performance being turned in by
Inphonic
(INPC)
at -40%.
I expect the results of this portfolio to continue into the new year as investors increasingly realize that the "experiment" of online advertising and moving retail operations online is now here to stay.
The Portfolio and Individual Stock Performance
First off, here are the stocks I suggested should go into a diversified Internet Forever index.
- Search: Google (GOOG) - Get Report, Yahoo! (YHOO) , IAC/Interactive (IACI) (via AskJeeves), Microsoft (MSFT) - Get Report
- Media: RealNetworks (RNWK) - Get Report, Apple Computer (AAPL) - Get Report, Time Warner (TWX) , News Corp (NWS) - Get Report (The MySpace acquisition gives News Corp an entree here, although I do think the company will not rest with that one buy.)
- Commerce: Amazon.com (AMZN) - Get Report, eBay (EBAY) - Get Report, priceline.com (PCLN) , Monster Worldwide (MNST) - Get Report, E*Trade (ET) - Get Report
- Mobile: InfoSpace (INSP) - Get Report, Inphonic, Jamdat Mobile
- Enablers/Analytics/Marketing: Keynote Systems (KEYN) , aQuantive (AQNT) , WebSideStory (WSSI) , Marchex (MCHX) - Get Report, Miva (MIVA) , ValueClick (VCLK) , VeriSign (VRSN) - Get Report
- China/India (deserves its own category): Sina (SINA) - Get Report, Shanda Interactive (SNDA) , Tom Online (TOMO) , 51Job, Baidu (BIDU) - Get Report, NetEase (NTES) - Get Report, Rediff.com (REDF)
Now here are the results overall for each stock in the past two months.
At the time of publication, Altucher and/or his fund was long Time Warner, although positions may change at any time.
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;
to send him an email.
Interested in more writings from James Altucher? Check out his newsletter, TheStreet.com Internet Review. For more information,
.
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