(MONEY Magazine) – Late last year, in the midst of Internet mania, we sought to separate myth from reality and come up with what we called a "sensible" portfolio of Web stocks. The world of Internet investing has changed profoundly since then. This spring, investors suddenly tired of wildly overpriced stocks with great stories but no profits or significant market share. Since peaking in March, the Goldman Sachs Internet index has shed 48%. Among the casualties: former high fliers like DoubleClick and CMGI, which are a jaw-dropping 75% or more off their highs.

All the more remarkable, then, that our sensible portfolio performed so well. Of the six stocks we picked, four have racked up triple-digit gains (from Oct. 27 through Aug. 11), one is off modestly and only one has tanked. As a group the six averaged a juicy return of 112% vs. 35% for the Nasdaq and -9% for the Internet index.

It's rare to get returns like this, so we wouldn't blame you if you cashed in your winnings now and put your money to work elsewhere. In our original story, we said these stocks were pretty frothy, and the winners are even more so now. Sure, they survived the shake-out and continue to climb. But all our big gainers are priced for perfection--even the smallest stumble in their businesses could decimate their stocks. So if you decide to stay in, be aware that you are holding some of the most unpredictable investments around. Here's a closer look at the performance and prospects of each of our picks.

Ariba (ARBA). Our biggest winner was Ariba, which has nearly quadrupled, gaining 277%. Analysts continue to like the company because of the snowballing demand for its software, which helps automate transactions between companies and their suppliers. That makes Ariba a key player in the hot Internet infrastructure market, which isn't dependent on the whims of consumers. Also, Ariba has forged a high-profile partnership with IBM and i2 Technologies, and has landed big-dollar deals with Dell and Volkswagen. (Ariba is a favorite of Ultimate Investment Club member Joe McNay; see page 87). But while sales will grow 176% this year, the company is still not profitable and sports a dizzying price-to-sales ratio of 197; Ariba expects to make money by 2002.

Exodus (EXDS). Runner-up Exodus posted an impressive 191% gain. Not much has changed for this Web hosting concern, which operates Web sites for Fortune 500 companies. It is the clear leader in its field and getting stronger. "They're winning 80% of the business they bid on," says PaineWebber analyst John Hodulik, who rates the stock a buy. New customers include GE, McDonald's and Williams-Sonoma. That said, Exodus still doesn't make money (it hopes to turn profitable in 2002), and it's facing increased competition from giants like EDS and IBM.

Verisign (VRSN). The stock has gained 145% since our story. Verisign has a lock on the market for "digital certificates," which make online transactions secure. And its prospects got even brighter after its June acquisition of Network Solutions, an outfit that registers Internet domain names and throws off a steady stream of cash. "You have to pay Network Solutions to store a domain name," says David Zale, an analyst at Sands Bros. & Co., who rates the company a strong buy. The Janus funds were big buyers of Verisign in the spring. But the stock has gotten extremely expensive. Its P/E ratio is a hefty 326 times 2001 earnings vs. 29 for the S&P 500.

Inktomi (INKT). Another infrastructure play, Inktomi sells software for high-speed searches over the Web and data retrieval on networks. Customers include America Online and AT&T. It has gained 122% since our story and its business remains strong, but it faces increasing competition. One rival is Akamai Technologies, which may have a more efficient way to conduct searches, says George Gilbert, manager of the Northern Technology fund. Inktomi also trades at a whopping 366 times estimated 2001 earnings.

Safeguard Scientifics (SFE). This one has given investors a roller-coaster ride. Safeguard is an incubator, which means it invests in promising Internet start-ups and takes them public. After we recommended it at just under $27 (adjusted for a subsequent three-for-one split), it peaked at $98 in mid-March, then fell back to $34 during the April Internet sell-off. It hovered in the low $30s until early August, when influential Merrill Lynch Internet analyst Henry Blodget downgraded it (along with 11 other Net names), and it shed 20% of its value in a week.

The result of all these ups and downs: Safeguard is off 12% from our original buy price. By some measures, that makes it a bargain. That's why Munder NetNet fund manager Paul Cook recently picked up some shares. Be warned, however: Safeguard's revenues can be unpredictable because they depend in part on the wobbly Internet IPO market.

Earthweb (EWBX). This outfit was our only dog. It's an online hub for high-tech professionals, offering news and job listings while selling training and technical manuals. It has lost half its value since our piece ran, in part because investors are disenchanted with sites that rely largely on advertising and subscription revenue. Additional competition from similar portals CNet and ZDNet hasn't helped. If you still own this one, we would advise selling it.

--CAROLYN WHELAN