The Digital Age is upon us, and so is the rush to cash in. Soon Iwerks and hundreds (if not thousands) of New Age media companies will be trucking down the electronic highway, unloading everything from interactive video games to pay-perview movies into our living rooms. Wall Street is pitching zillions into the “hot” new technologies, hoping to score big with a Microsoft of tomorrow. For small investors tempted to leap in, watch out. The hype runs deep. If big money can be made, lots can be lost. Either way, a crowd of “insiders” stands ready to help you place your bets:
most big houses have established new media groups. Salomon Brothers, for instance, has distributed more than 60,000 copies of a report entitled, “When Worlds Converge,” profiling industries and players in the new technologies. “It’s like a John Grisham novel,” enthuses a Salomon spokesman. “We just keep reprinting it.” Such analyses contain reams of savvy advice, from the hot poop on “high band-width networking” to discussions of “asynchronous transfer mode switching.” Trouble is, specific investment recommendations are usually reserved for institutional investors; individuals get the word after the good stocks are snapped up cheap.
Trendy new technology newsletters are coming out, but only a few offer sound investment tips. Interactive Multimedia Investor, published by Paul Kagan Associates in Carmel, Calif., follows the companies shaping our interactive future. A recent issue profiles Silicon Graphics, the “eighth fastest-growing company in the Fortune 500,” and ranks top performers. Among them: Broderbund, the children’s-game and educational-software company, and BroadBand Technologies, a communications-equipment manufacturer. Both rose 30 percent or more last month alone. VentureFinance, an investors’ crib sheet published by Technologic Partners in New York, tracks noteworthy start-ups and “hot” public offerings. One such company to watch: People’s Choice TV, a new wireless network up twofold since its initial offering in July. For investors surfing the new media wave, these publications have their limitations. The problem, says Mark Hulbert, whose weekly Financial Digest ranks some 150 newsletters, is that “none make specific investment recommendations or help you create a model portfolio.” The result: an investor is on his own.
Those who doubt their infallibility as stock pickers might prefer to have someone else do the picking. Mutual funds are quickly getting into multimedia and doing well. Montgomery Global Communications in San Francisco, started in June, is already up 25 percent, powered by surging interest in communications stocks worldwide. Among its star performers: Nokia, a wireless communications company in Finland, and Newbridge Networks of Canada, a digital-switching manufacturer whose shares have doubled over the past year. Flag Investors’ telephone fund, in Baltimore, has risen 25 percent this year. Smith Barney Shearson’s telecommunications growth fund has gained 35 percent; Fidelity Investments’ three media and communications funds have done almost that well. Typically, their holdings span an array of domestic and international stocks, from giant Time Warner and Bell Atlantic to such small companies as Oracle or SynOpties Communications, likely leaders in the software propelling interactive TV.
Now for the caveat. Remember the health-care and biotech rage two years ago? Or the “New Europe” funds that proliferated with the fall of communism? All flourished their first year or so, then lost big when reality fell short of expectations. John Rekenthaler, at Chicago’s Morningstar fund-ranking service, thinks it’s happening again. Too many companies are pushing into too narrow a market, all being chased by too much money. That spells “danger,” says Rekenthaler. For more than a few New Age companies, he predicts, the “ups” and “downs” are going to be as wild as the Turbo Ride.
