Internet stocks… Good investment?
Nov 21st, 2011 by tamara
Linkedin launched in May with great success.
On the first day it started trading with an initial price of $45 and by the end of the first day it reached $122.70.
Just two weeks ago, it was Groupon’s turn to raise capital and they too, showed gains on their first day of trading starting at $20, and rising to $31- ending the day at $28.
We question if internet stocks are to be considered a good investment?
According to James K. Glassman they are “fun but risky”.
Glassman provides 6 rules to assist in deciding whether a company is worth investing in:
-Smart business proposition.
-Innovation.
-Awareness of competition.
-Analysis of the balance sheet.
-Faithful patience.
-Diversification.
If we implement Glassman’s rules to see whether Linkedin and Groupon are worthwhile investments, we see that both companies are interesting propositions.
Linkedin is unique, while Groupon has many competitors.
Balance sheets will show no profits for both in 2011, however, Groupon’s accounts will look worse especially after all the adjustments have been made.
Patience is always needed when considering investing in stocks, because the temptation of a quick gain is always there…
To conclude, Linkedin has been around and stable for quite some time, while Groupon is new to the market, and has had some tough times this year…
Citation: K. Glassman, James. “6 Rules for Investing in Internet Stocks and 8 Promising Picks” Kiplinger’s Personal Finance. October 2010.<www.kiplinger.com/columns/openingshot/archives/6-rules-for-investing-internet-stocks-8-promising-picks.html>
Halliday, Josh. “Groupon share price soars after IPO” The Guardian. 4 November 2011. <http://www.guardian.co.uk/technology/2011/nov/04/groupon-share-price-soars-ipo>
Bladwin Clare & Selyukh Alina “LinkedIn share price more than doubles in NYSE debut”. Reuters. May 19, 2011. <http://www.reuters.com/article/2011/05/19/us-linkedin-ipo-risks-idUSTRE74H0TL20110519>