This column was originally published on RealMoney on Nov. 8 at 2:17 p.m. EST. It's being republished as a bonus for TheStreet.com readers.Sometimes you have to take matters into your own hands. I believe a decent index of Internet stocks would be a reasonable buy-and-hold over the next decade or so. However, the available Internet indices are all out of date and there's no longer an indexed way to buy and hold the Internet stocks as a basket. So, I'll put together a basket of stocks that I think would represent the Internet. But first, For instance, it used to be you could simply buy the Nasdaq 100 Trust as a proxy for the Internet back in 1999. But the makers of the Nasdaq 100, having dropped excellent companies to fill in with Internet stocks at the very peak in late 1999 and early 2000, then committed similar sins by dropping the Net stocks after the bust. Similarly, indices like the Amex Interactive Week Internet Index contain stocks that I do not feel should be in a basket of stocks representing "the Internet." Juniper ( JNPR), F5 Networks ( FFIV) and Sun Microsystems ( SUNW) are all important stocks and perhaps should be in a basket representing communications or communications technology. But ultimately, these stocks are commodities, and after the next wave of growth they will not have the nonstop growth I expect the Internet stocks will experience. BEA Systems , Tibco ( TIBX), Intuit ( INTU), Red Hat and even Websense ( WBSN) also are interesting stocks to follow, but they face similar commoditization threats, which is why these stocks are now usually trading at single-digit multiples near their cash levels. One Internet-based index even has CMGI in it. Although I do think CMGI was at one time the Internet behemoth to beat, it has been beaten and should not be on an index.
DIY IndexingI hate to use a "3C" cliche, but the Internet is about commerce, community and content. If someone wanted to put his money in a basket of Internet stocks and go away for 20 years (i.e., have the index be his investment in the Internet), here is how I would approach it.
- Media: RealNetworks (RNWK - Get Report), Apple Computer (AAPL), Time Warner (TWX) News Corp. (NWS - Get Report) (The MySpace acquisition gives News an entree here, although I do think the company will not rest with that one buy.)
- Commerce: Amazon.com (AMZN), eBay (EBAY - Get Report), priceline (PCLN), Monster Worldwide (MNST - Get Report), E*Trade (ET - Get Report)
- Enablers/Analytics/Marketing: Keynote Systems (KEYN), aQuantive , WebSideStory (WSSI), Marchex (MCHX - Get Report), Miva ValueClick (VCLK), VeriSign (VRSN - Get Report)
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