The Cutting Room: Oh Henry!

Our Silicon Valley columnist gives his behind-the-scenes take on wunderkind Internet analyst Henry Blodget.
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Check out Jim Cramer's extra take in The Cutting Room this weekend.

I first met Henry Blodget a little over a year ago, when he still toiled in relative obscurity for

CIBC Oppenheimer

. I chatted with him hurriedly in New York at the suggestion of a very influential chief financial officer in Silicon Valley who told me Blodget was sharp. This was before "the call," Blodget's then-outrageous suggestion that

Amazon.com's

(AMZN) - Get Report

shares would hit 400 within 12 months. The shares zoomed over 400 within months, (where they remain today, adjusted for splits), and Henry moved on to stardom and really big bucks at

Merrill Lynch

, where he's a big muckety-muck Internet analyst today.

But anyway, the point is that people change jobs (myself included) and Amazon enhances its strategy, but Blodget remains consistent. He consistently plugs a handful of Internet leaders, urges investors to overlook near-term considerations (while not betting the farm on Internet stocks) and makes himself a highly visible, amiable and informative commentator on the Internet phenomenon.

Now don't read this as a screed against Blodget. It's not. But investors must understand the value that different observers add. Blodget won't necessarily guide a client, reader or viewer toward a greater understanding of a particular stock. But despite some rhetorical flip-flopping that has infuriated corporate executives and money managers alike, he's terrific at trend-spotting and explaining themes.

With that as backdrop, I found Blodget on my green-room television Friday night wearing the same dark suit, starched white shirt and conservative tie he'd worn less than two hours earlier on another network (as

Johnny Carson

used to say). And he proceeded to do his thing: explaining themes, being consistent, joyfully offering kernels for true believers in Net stocks.

If viewers tuned in hoping for a contrarian take on the pre-Christmas e-tailing stock runups, they stopped on the wrong station.

Brenda Buttner

wondered if this will be a "December to remember," and our four-man choir of

James J. Cramer

,

Herb Greenberg

,

Dave Kansas

and Blodget sang loudly, "Yes!"

Cramer, a man not known for his gentle approach and reasoned demeanor, promised that from here out "any sell-off is a gift" to investors wanting to dive in and called this "the most powerful rally I've ever seen in my 20 years in the business."

Of course, we do have someone at

TheStreet.com

willing to play the Grinch. Greenberg, in his role as staff curmudgeon, reminded those assembled of the financial adage that "if Santa Claus should fail to call, the bear will come to Broad and Wall." Herb, can we get the history on that saying, please?

Blodget also sounded an ever-so-faint note of caution, reminding viewers that the market for Internet stocks will continue to shift from consumer companies to infrastructure concerns. (

Buy.com

, the mother-of-all business-to-consumer companies and whose IPO Merrill Lynch is set to underwrite surely will be the exception, right?) Can you trade on Blodget's thematic guidance on Monday? No. Can you keep it in mind as you plan your investment strategy? Yes.

On the subject of business-to-business e-commerce stocks, there was almost no holding back this group. Jim has been banging the table on B2B stocks -- the ones that build Amazon-like operations but for industrial and commercial markets -- for weeks. For that matter, Blodget was one of the first people to suggest to me early last summer that B2B was going to be a huge Wall Street phenomenon. Herb acknowledged that this is one fad that has a lot going for it but wondered, true to form, if database and Web software giant

Oracle

(ORCL) - Get Report

or e-consultant

Scient

(symbol)

is the right way to play it. "Why do you say

or

when it's

and

" countered Jim. Cramer's a cup-and-a-half-full kind of guy, no?

Leave it to Blodget to put things into perspective. A few years ago, he noted, Internet stocks in general barely were a blip. Today they account for hundreds of billions of dollars in market value. Today, publicly traded B2B companies are worth perhaps $20 billion to $30 billion. Within five years they too will be worth half a trillion. That's why Henry gets along with his investment-banker colleagues.

But Henry, asked Brenda, aren't these darn things risky? "You have to put the risk into context," answered the towheaded analyst. To wit, one stock in your portfolio that goes up 10-fold makes up for a bevy of losers.

On to the Chart Man, the moment of our show when

Gary B. Smith

and I play Siskel and Ebert (don't ask). We do our best to keep things lively, even when we agree on stocks. And despite agreeing on both issues we discussed this weekend, we clashed in a way I think was illuminating for investors.

Discussing

Starwood Hotels

(HOT)

, Gary allowed that although Starwood hasn't behaved like its sizzling stock symbol, if it could just break out of its resistance it would be good for a nice run upward. I added some background on the company (it runs

Westin

,

Sheraton

,

W

and other hotels; has disappointed Wall Street but pleased customers; and has had management defections) and noted that a Merrill Lynch sum-of-parts analysis pegs the company's true value at 32, despite its Friday close at 22 13/16. These immutable facts, and not the stock's movement in the next few days, are why HOT is looking warmer, I offered.

"Aha!" Gary said. Or at least that's how I heard it. Why buy now if you can fine-tune your entry point using technical analysis and get in at just the right price and time, Gary asked. And I fell back on what I think actually is a useful answer. In short, if you've got time to slavishly monitor Starwood and have the skills, resources and patience to choose the moment to invest, great. But if you don't watch green and red on a computer screen all day the way Gary, bless him, does, then get into a stock you think will go up and hang onto it until it does or until you've changed your mind. Traders vs. investors. It's that simple.

On

Inprise

(INPR)

, once known as

Borland

, Gary suggested that the sudden tripling on sporadic volume bespeaks an unstable stock and therefore is risky. The chart, he implored, gave no comfort of further gains. The fundamentals, I replied, aren't any more helpful. This is a good example of a chat-room stock, propelled upward by rumors despite management's acknowledgement that the turnaround isn't yet complete. The Chart Man and his fundamental counterpart agree this one's a stinker for now. It must be going up.

Back to the gang for Stock Drill. Brenda reviewed Blodget's mid-summer calls of Amazon (up 73% -- he still likes it, though he thinks that January will be rocky),

America Online

(AOL)

(up 64% -- he still likes that too) and

Yahoo!

(YHOO)

, up 85% and one of his two picks again this weekend.

Blodget thinks Yahoo!'s big opportunities now include international expansion, and he sees the stock trading between 250 and 300 but not necessarily staying there. "We expect it to sag" in the first quarter, he said. His other fave of the moment is

DoubleClick

(DCLK)

, the Internet ad-serving software and advertising representation firm. Herb "I point out the risks" Greenberg asks if CMGI's frontal assault on DoubleClick's ad-services strategy is a worry. Sure, answers Blodget, but CMGI has challenges integrating its many acquisitions there.

Our panel made concrete predictions, with Herb forecasting a dismal Christmas for the bricks-and-mortar gang, Jim envisioning AOL's stock exceeding 100 and Dave imagining

TheStreet.com Internet Index

at 1200 by year-end (an additional 20% uptick for an index that's already worth two and a half times what it was at the beginning of the year).

Happy Holidays indeed.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

alashinsky@thestreet.com.