10 Updates

Internet Stock Sell-off: A Long-term Buying Opportunity?

Apr 13 2014, 11:57am CDT | by

Disclosure: I own FB put contracts Stock market sell-offs are usually the best time for long-term investors to invest in industries and companies with solid economic fundamentals. What’s the case...

Filed under: news

 
 
 

15 weeks ago

Internet Stock Sell-off: A Long-term Buying Opportunity?

Apr 13 2014, 11:57am CDT | by

Disclosure: I own FB put contracts

Stock market sell-offs are usually the best time for long-term investors to invest in industries and companies with solid economic fundamentals. What’s the case with the recent sell-off in Internet stocks (NASDAQ:PNQI)?

I would be careful and very selective, as the industry is subject to two important limitations:

First, most Internet companies rely heavily on advertising as the primary source of their revenues. And there are not “enough dollars to go around,” according to Barron’s Jack Hough.

“Google, Facebook, Twitter, and a slew of other high-flying dot-coms are headed for a pie problem,” writes Hough in a recent piece. “Viewed individually, each seems to have endless potential to turn popular; free services into more revenue by grabbing a larger slice of the online advertising pie. But as a whole, online ad spending is growing at fairly predictable pace, and won’t be large enough anytime soon to justify all of the high-flying valuations on dot-com shares.”

“Over the long term, total spending has more to do with total wealth than with how people view or hear ads—a relationship academics call principle of relative consistency. Simply put, people only buy so much stuff, and companies only devote of their budgets to convincing people to buy.”

Second, Internet companies rely heavily on “network effects” as the primary source of their competitive advantage–the benefits associated with a larger and larger number of people joining the network. The larger the number of people using a product or service, the more valuable the product or service is to every user.

Network effects arise on the demand side of the market and allow companies to quickly reach a critical mass of consumers—the early majority—and cross the “tipping point.”

The problem here, however, is that as networks grow in size, the distribution of benefits across members may be unequal — according to an article Hana Halaburda and Felix Oberholzer published in the April issue of the Harvard Business Review. Some members may benefit a great deal while others very little or not at all.

Worse, the network may be fractionalized, divided up into groups that will only benefit only if the network moves in a certain direction.

This means that a larger network may not necessarily bring higher benefits to each network group. And that may provide an opening to upstarts to grab a piece of the market from early movers who have been building a network in an emerging industry.

That was the case with eBay and Taobao in China, as discussed in a previous piece.

Hype should never be a substitute for due diligence.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was tol ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hish ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the south ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

8 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 mi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

8 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Sch ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

8 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kidex) t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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