Flashback To 1997 Investing In Internet Stocks

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At the risk of great personal embarassment, from time to time we invite you to jump into the Money Talks News “Time machine” for a vintage story to see what we were doing news-wise in the past (I’ve been producing Money Talks for nearly 20 years now) and to prove that yours truly didn’t always have snow on the roof. So first watch the story above. Then we’ll have a look at the stocks I suggested…

Stocks I suggested directly related to the Internet: Microsoft, Netscape and Cisco Systems

  • Microsoft: Back in August of 1997, Microsoft was trading at $130/share. Today (Oct 12,2009) it’s at $25.65. Sounds like a major loser…except for the fact that the stock has split a few times since then. On a split adjusted basis, old softie was around 10 bucks back then. Not a major winner, actually. But not a loser either.
  • Netscape: This one is tough to follow. When I did this story, Netscape was trading at $35/share. But it was purchased by AOL in March of 1999: each Netscape shareholder got a little less than one half a share of AOL for their Netscape shares. At that time, AOL was trading at 90ish and Netscape was around $41. Then, on January 11th of 2001, AOL merged with Time Warner. Each AOL share was converted into one share of a new company called AOL Time Warner. On January 11th, the stock closed at $141 per share. And hopefully that’s the day the former Netscape holders sold their stock, because it’s been all downhill ever since. Since that match made in hell, the stock of Time Warner (they dropped the AOL part of their name in 2003) has fallen to a reverse-split-adjusted price of about $10. Ooops!
  • Cisco Systems: Here the story is a lot happier and a lot simpler. On a split-adjusted basis, Cisco was about $9/share back in August of 1997: today it’s around 24. That’s pretty good; more than a double… but still not what you’d consider a home run.

Now let’s move on to the stocks I suggested that were indirectly related to the Internet: Federal Express, Ticketmaster and Wal-mart.

  • Federal Express: Split adjusted, FedEx was trading at about 31.50 in 1997: now it’s around 78…so it’s a double.
  • Ticketmaster: This one is also a mess: ticketmaster was brought public for the first time in 1996, with Microsoft co-founder Paul Allen retaining control of 54% of the company. But in 1998 Barry Diller bought his share and the rest of the company and merged Ticketmaster with USA Networks. So, although this company ulitmately went public again later as part of InterActiveCorp, this stock was only a stock for less than a year after I mentioned it on the air. I can’t seem to find the price at which it was taken private…and am honestly not interested enough to try harder.
  • Walmart: this one is easy. On a split-adjusted basis, Walmart was about $18 a share in August of 1997: today it closed at just under $50: a triple.

All in all, I have to say that this group of stocks wasn’t all that super, especially considering they were investing in the Internet if not in its infancy, at least when it as still a toddler. However, when you consider where the stock market was at the time, they start to look a lot better. Twelve years ago, the Dow was at 8,194. Which means in the last 12 years, it’s only gone up 20%: at least this portfolio soundly beat that miserable showing!

So if you could travel back to a place in time that the Internet was relatively new (and I still had brownish hair,) you’d have made some money. Too bad we can’t time-travel. But there is another sector that might produce even better gains ten years from now: more on that in a future story. Stacy tuned!

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