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Stock picks by the pros
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March 10, 2000: 12:57 p.m. ET
CMGI, VerticalNet, CriticalPath, Amazon, eBay, Cisco win praise
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NEW YORK (CNNfn) - Tech companies in the B2B space were among money managers' and analysts' top picks Friday, with an ASP (application service provider) and an online content aggregator also winning praise.
Here are some comments on the stocks that recent guests on CNNfn are
buying -- and why:
"Last year, it was the year of portals," said Peggy Ledvina, Internet analyst at Dain Rauscher Wessels, "it was the year of e-tailers, it was the year of these consumer hubs, and some media plays where content was an advantage. This year it's really a focus on B2B, primarily vertical exchanges. We're seeing obviously the run of VerticalNet (VERT: Research, Estimates) and other companies that are coming out in that category: PurchasePro (PPRO: Research, Estimates), OnVia (ONVI: Research, Estimates), those sorts of things."
"This is also the year of application service providers and hosting companies like Breakaway Solutions (BWAY: Research, Estimates) and those companies that pick up in that sector. This is also the year of what we will call syndicated services. InfoSpace (INSP: Research, Estimates) had a run last year. InfoSpace will continue to run. You'll see more companies in the content space that are not just delivering static text content, but delivering media content, aggregating it from a variety of sites and bringing it together and getting it out to many in audio and video."
"This is also the year of incubators. There are tons of incubator companies out there, like the CMGIs (CMGI: Research, Estimates) of the world, and that's where you're going to see a lot of the play this year."
 'Pros' bonus: For more on CMGI from Peggy Ledvina, Internet analyst at Dain Rauscher Wessels, click on [413KB WAV] or [413KB AIFF]
"There are two different kinds of companies in the Internet space," said Jim Waggoner, market and technology strategist at Sands Brothers & Co. Ltd. " There are the operating companies, the dot.coms, and the B2B types of companies, and then there are the incubator companies of which CMGI (CMGI: Research, Estimates), of course, is one of several. Their gains and losses can be purely paper gains and losses, and therefore the earnings that they report are not necessarily cash earnings."
"The losses that CMGI reported yesterday were on top of some spectacular revenue gains, as the reports indicated, 1,400 percent up on a quarter-to-quarter basis, 24 percent up on a sequential basis, and then management comes out and says that going forward, those revenue gains will be 20 percent sequentially. But the actual loss was lower than had been expected because we're talking about non-cash issues and some non-cash charges. With CMGI, you're really buying future growth, you are buying, in essence, a mutual fund, a portfolio of Internet companies, and in CMGI`s case, companies like Yahoo! (YHOO: Research, Estimates), AltaVista, Lycos (LCOS: Research, Estimates) and so forth, which are some very, very big names."
"Of course," admitted Waggoner, some tech stocks can be pricey, "but there's always a bargain. We believe very strongly in playing the rotation in our favor. So stocks in a corrected phase or stocks that haven't participated, very much so. One that we've liked for some time that's really been a laggard is a company called Mail.com (MAIL: Research, Estimates). It's in the e-mail business. The e-mail business is like dancing with your sister, but it's a big business, and they're selling at 10 percent, Mail.com is selling at 10 percent of the most comparable company, Critical Path (CPTH: Research, Estimates). There's great value there."
"I think that there are some opportunities in the B2C, B2B space, as well, although e-tailers are at a crossroads now. The original game plans haven't worked all that well, they're a lot more controversial, but the greater values are there. Amazon (AMZN: Research, Estimates) is probably the most controversial, undoubtedly the most speculative because the cash flows are so negative right now, but if they pull this turnaround off, that stock at 64 is a pretty good value."
"eBay (EBAY: Research, Estimates) is also a stock that we've liked for quite some time. We think that auction space is the place to be, and we've liked it, and it's actually been one of the best performers in that group."
"Why should you pay a 20 or 30 times multiple for a company like Procter & Gamble (PG: Research, Estimates)? They sell toothpaste; there's nothing magic about it," said Jim Glickenhaus, portfolio manager at Glickenhaus and Co., commenting on the "new economy" vs. "old economy" stocks debate. "It's not like Cisco (CSCO: Research, Estimates) that makes a product that really is unique and it's going to grow at maybe 30, 40, 50, 60 percent a year."
There's good news and bad news about the emergence of online B2B, said Joe Battipaglia, chief investment strategist at Gruntal & Co.
"In the first stage of this transition, these companies that create the exchanges and the business to business space for companies like General Motors (GM: Research, Estimates) and so on, will be rewarded with rising valuations. So, yes, we like those stocks. We own VerticalNet (VERT: Research, Estimates) in this space. However, in the future, the old economy - let's call it the real economy -- is going to adopt the B2B space for themselves. So, that's going to change the model once again. And these companies will have to be absorb changes, modify their model, or else they'll fall by the wayside."
The views presented here are solely those of the analysts quoted. They do not represent the opinions of CNNfn on whether to buy or sell shares of a particular stock. 
-- compiled by Tatiana D. Helenius
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