For all the talk of Bubble 2.0, the Internet has investment characteristics that investors normally have to wait decades to see: phenomenal growth in front of it, and deep-value characteristics. When is a company a deep value?
A great balance sheet: Cash on the books and no debt, so that you know there is zero chance the company will have financial troubles anytime soon. Strong cash flow: Hypothetically, if a company has a market capitalization of $100 million and earnings of $10 million, that's a 10% earnings yield. Compare that earnings yield with other comparable investments (for instance, a Treasury bill at 4%) and you can determine which is the better investment. Part of the calculation involves determining if those cash flows are stable. Will the company consistently earn 10%? If the company is growing, then you've got the best of every world -- it's like a bond, where the coupon is actually increasing over time. Right now, there are several deep-value plays in the Internet world; I've written about some of them in my Internet Review newsletter.