LiveWorld Transcripts

NBCi presents

Internet Investment Analyst Steve Harmon
The State of Internet Stocks

July 07, 1999

Internet Investment Analyst Steve Harmon shares his views on the state of internet stocks and how to choose the best investments.

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CNBC: Welcome to CNBC.com's MoneyTalk Live! Our guest today is Internet Investment Analyst Steve Harmon, a frequent commentator on the web and guest on CNBC. Harmon created the ISDEX, Internet Stock Index, and was Senior Investment Analyst for Jupiter Communications in 1995-96. In December 1995, he authored a comprehensive databook that forecasted five years of Internet growth in such areas as e-commerce, e-music, broadband cable, Internet, content, software and hardware among others. Before Jupiter, Steve was with Paul Kagan Associates. Hi Steve and welcome to CNBC-Live!

Steve Harmon: Hello everybody! Let's get ready to rumble.

Fool This: What's your expectation on Yahoo earnings and the street's reaction?

Steve Harmon: Yahoo has always pleasantly surprised analysts over the past three quarters, and I expect them to pleasantly surprise us again. The growth of Yahoo, especially with the integration - they may take a hit with acquisition costs of Geocities and Broadcast.com coming up - but I see them being a strong multimedia powerhouse, throwing off page views across internet and video and across the community sites.

Robk: How do you screen an Internet stock? What are the key indicators you look at before you buy an internet stock?

Steve Harmon: The first one is market opportunity. For example a stock like stamps.com - how big is the postage market? It's probably 4 or 5 times the book market. You figure every business in the U.S. and a lot of businesses use postage. And how convenient would it be for them to download postage via the web - print it on their own envelopes and be on their way. So the market there is huge. I look for market potential. Second thing I look at is management. Does the management have the ability to execute, to realize that market potential. We all know how to play basketball, but very few of us can slam dunk or make it look as easy as Michael Jordan. So, can management dunk the ball? Or at least hit a few free throws. The third item I look at is quarter-on-quarter sales growth. Is a company moving into the market potential, and what percentage of the market are they taking. Fourth, and maybe final one would be: are they the category killer? Have they pioneered the category, because that has advantages to it. I also look at valuation and other items, but I don't want to go on for 5 minutes! Good question.

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