FFIV free and valuable upticks! "How the Stock Market Spent My Summer Vacation: John Dorfman
(John Dorfman is president of Dorfman Investments in Newton,
Massachusetts.
Newton, Massachusetts, Aug. 17 (Bloomberg) -- While I was relaxing at the beach, the major stock-market
averages had a
pleasant week, gaining about 2 percent. But as always, the
movement in the averages barely hinted at some of the triumphs
and tragedies in individual stocks.
F5 Networks Inc. shot up 70 percent for the week. The
Seattle company makes software for handling Internet traffic.
Since it started trading on June 4, the stock has risen to $54.44
from $14.88.
A history of operating losses seems to be de rigeur these
days among stocks making a splashy debut. And F5 Networks can
provide that. It lost $1.5 million in fiscal 1997 and $3.7
million in fiscal 1998. In its first quarter as a public company
-- the third quarter, which ended in June -- it lost $1.5 million
on revenue of $7.6 million.
To this cute puppy the stock market has assigned a value of
$1 billion, as of the end of last week. That puts the stock at 33
times annualized revenue. If we assume that revenue will grow 10-
fold and that the company will turn profitable and enjoy a 10
percent profit margin, the stock is now selling at 33 times
earnings in the year ... well, who knows what year.
Of the 15 biggest gainers last week -- among stocks with $1
billion in market value or more -- 10 had the word ``networks,'
the word ``communications' or the expression ``.com' in their
names. It reminds me of the 1960s, when almost any stock with a
name ending in ``onix' was good for a ride. I hope that
investors in today's trendy stocks understand what they are
getting into. But I believe that most of them don't." |
