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TWST: Let's start with an overview of what you're covering in this
space.
Mr. Boyd: My current coverage universe consists of seven stocks:
salesforce.com (CRM), eBay (EBAY), Google (GOOG), Yahoo! (YHOO), Move
Inc. (MOVE), Microsoft (MSFT), and Blue Nile (NILE). TWST: What are the criteria that you use to add something?
Mr. Boyd: There are several criteria. This being a growth sector, we
look first and foremost for stocks with a strong growth profile. We zero
in a bit more by looking for stocks that have a unique business model
and are best-in-class in their particular space or niche. Finally, we
are particularly interested in stocks where we see a major disconnect
between valuation and the fundamentals. TWST: You indicated that you still feel this is a growth industry. What
are you looking for and what do you see over the next couple of years?
Mr. Boyd: If you don't mind, I will split the Internet industry into the
two key subsegments that we cover, the first being online advertising
and the second e-commerce. Our view of the Internet advertising sector
is very positive. The consensus view coming into 2006 was that Internet
advertising growth, although still very robust, was starting to
decelerate and that the hyper-growth phase was coming to an end. We came
into the year expecting acceleration in the growth rate, making our view
a bit contrarian. A group called the Internet Advertising Bureau
released a report this past May showing that Internet advertising
revenues actually accelerated on a year-over-year basis in the first
quarter. That's the most recent data that we have. The primary
beneficiary of this increased spend continues to be keyword search,
although branded and other media also continue to grow nicely. We also
have a very positive view on e-commerce. Data from the U.S. Department
of Commerce shows that US e-commerce has been growing at about 25% for
the last five years. The growth just doesn't seem to be slowing down.
The penetration of total retail sales in the US by online retail sales
continues to increase and the rate of penetration continues to
accelerate. So we have very positive views on both of these subsectors.
Tickers included in this excerpt: AMZN, BBY, CRM, EBAY, GOOG, MOVE, MSFT, NILE, VG, WMT, YHOO
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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