|
The Birth of Two Bull Markets:
Biotechs and the Beginnings of a Raging Internet Bull Market In Europe
by Brian Hicks
Without a doubt, the best sectors I see for small and microcap investors heading into the next millennium are biotechnology and Internet stocks. But not the U.S. Internet market. The next raging Internet bull market will occur in Europe. And I have an excellent, under-followed European Internet stock for you.
London Calling
It was about 2:30 a.m., Friday night in a London nightclub when I discovered the epicenter of the next great bull market... still in its infancy.
Well past my bedtime, my British colleagues offered some "pick-me-up" juice.
Amidst the maniacal cacophony of European techno, I drank a glass of VRB -- a combination of vodka and a can of Red Bull.
There's only one way to describe Red Bull -- 8 ounces of pure caffeine that goes straight to the heart.
It took several minutes for the concoction to take hold. But when it did, it came on strong.
The massive horde of gyrating bodies on the dance floor looked like a surreal scene from a David Lynch movie. A 6'7" man danced with a dwarf.
By this time the crowd was drinking VRBs en masse. The free-flowing liquid had turned the dance floor into the orgy of the damned. Young lovers kissed on the periphery of the club.
My American inhibitions were wound much too tight for this madness. I felt like I was going to explode. So I made my way upstairs to the lounge.
After an hour of nonsensical conversation about American politics (Warren Beatty had just announced his candidacy for president), I realized I'd discovered the opportunity of a lifetime: European Internet is exactly -- exactly -- where U.S. Internet was in 1996.
Sure, the Europeans have 56k modems... and some even have cable-access Internet. But the infrastructure is so feeble, it's like driving a Porsche 911 on a kiddie go-kart track. No matter how fast your machine, you ain't going anywhere.
I sat there and listened in excitement to my colleagues' explanations of why the Internet would never be as popular in Europe as it is in the States. "The Internet isn't popular... Nobody is willing to use their credit card over the Internet (I heard this excuse at least a dozen times)... European Internet infrastructure is too unreliable..."
If I'd had my cell phone, I would've called my broker immediately... so I could have market orders ready for Monday morning. I would've bought every European Internet stock I could get my hands on.
Let's turn back the clock
In the mid-1990s, I used America Online as my Internet provider. You probably remember those early days of Internet, when access was limited at best. The constant dial tone...that annoying buzz... and then finally... you're on.
But the sudden euphoria of being online was short-lived. AOL usually crashed every 15 minutes, "knocking you off."
It got to the point where I finally just cancelled my account to AOL.
But, whoa, what a difference two years make. I'm talking quantum leaps in technological advancement.
In the Taipan Research Department, we have a dedicated T1 line. We're "always" online. And downloading large files takes seconds, where it used to take hours. (I know I'm overstating this a bit, but I cannot live without the Internet. It's like my car -- it defines my independence.)
Had you known then what you know now
I won't hide the fact that as an investor -- even speculator -- I totally missed the birth of the Internet bull market in the U.S.
The consequence of my lack of foresight is obvious. Instead of spending weekends at my ocean-front mansion (paid for with shares of AOL, Yahoo and Amazon that I bought five years ago), I'm raking leaves on a chilly Saturday morning in front of my three-bedroom cottage in the Baltimore suburbs.
But I'm in good -- and rather crowded -- company. You see, 99.9% of investors missed the Internet locomotion.
The only ones who made money off these stocks were the vanguard techies: technologically savvy investors who understood the Internet for exactly what it is: a social and economic earthquake on a par with the Industrial Revolution.
Wall Street missed the boat, too. Not terribly surprising, though. Stodgy Wall Street analysts are always playing catch-up to cutting-edge developments.
That's because when you reduce it to its most basic form, analysts can't see past financial statements. It's all P/E ratios and book values.
So they miss the very essence of life-altering breakthroughs.
In fact, I still have an analyst report from a high-powered Wall Street firm concerning the Internet. The report was written in 1996. It stated, "As an e-commerce model, we are not convinced the Internet is a viable business paradigm."
(Perhaps you remember the stock recommendation. It was Elcom International -- a business-to-business e-commerce stock.)
That conclusion was based on one very simple premise: Customers would be unwilling to make purchases using a credit card over the Internet. (This thinking is rampant in Europe.) The conventional thinking then was if the American consumer was unwilling to spend cash on web sites, there would be no cash flow to generate future Internet projects. The Internet would just become a niche market, if not an utter failure.
I wonder if that analyst is still employed.
More parallels
Another reason I'm an aggressive speculator in European Internet stocks is that the European attitude toward the Internet isn't real positive. This is always the time to buy.
I don't mean they don't like it. But they're cautious, waiting to see validation that the Internet is a viable business model.
I can already answer that question for them. It is.
In fact, the London arm of Taipan's corporate mother hen Agora Publishing, Fleet Street Publications, has no web site to speak of.
Imagine! An investment advisory publisher with no Internet presence. That's suicide.
But this was music to my ears. Because, after all, this was like getting in a time machine and heading back four years, when nobody in the United States wanted to buy Internet stocks.
Here's my belief: In three years the Internet will grip Europe like Hitler's blitzkrieg. And when it does, European Internet stocks will fly to the moon. And here's one I think could go from US$10 a share to over US$35 in three years.
Read on...
|
