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Contrarian Pans

Our weekly list of the 10 most overvalued, overrated stocks. These are the stocks the analysts are pushing the hardest and the crowd is rushing to buy. These are also the stocks which have the farthest to fall when investor sentiment turns.  Stay ahead of the crowd, and avoid these stocks where mania has taken a front seat to fundamentals.


Name Ticker Price Projected
P/E Ratio
Price/Sales 5 year
Growth Rate
(Proj. P/E )/(5yr. growth )


1. eBay Inc.

EBAY 143.63 427.6 230.2 63.1% 6.81 Online Auctions
Online auctioneer that has been mistaken for a technology stock. The online auction world is becoming increasingly crowded with few barriers to entry.  The recent entry of Amazon.com to the field is likely to put the heat on EBAY in coming quarters. Compare EBAY's valuations to established industry leader Sotheby's. When investors categorize this one in the correct industry (i.e. auctions, not internet) it will have far to fall.  Well publicized technical problems have put a damper on stock price recently.

2. Yahoo Inc.

YHOO 178.13 316.5 158.3 59.4% 5.33 Internet Portal
Internet search engine turned "portal". Valuations on YHOO are at manic levels, even compared to its overpriced industry. Portals (a.k.a. trying to provide the broad range of services that AOL does) are this year's fashion. Unfortunately everyone has bought the stocks, and everyone in the online arena has rushed to start their own portal. Portals are  increasingly becoming commodities as they race to please everyone by offering the same features as their competitors.When sentiment turns it will be ugly for holders of this stock. YHOO's current valuation levels discount the next 5 years of earnings growth. Earlier this year the stock's market cap briefly surpassed  the combined market cap of all stocks traded in Singapore.

3. At Home

ATHM 54.94 261.6 196.2 60.0% 4.36 Internet
ATHM is the leading provider of cable-based and leased digital line internet access services to consumers.  Recent acquisition of Excite makes company a player in the increasingly crowded portal company.  Trading at 196 times sales.   Current valuations discount all growth out to 2003 and leave no room for error (or for advances in technology).

4 Ameritrade

AMTD 108.63 144.2 26.2 33.8% 4.27 Internet
Online broker has been spending heavily in an effort to maintain its growth momentum in the increasingly crowded and competitive online brokerage field.  Company's recent spending will come back to haunt it when the inevitable market downturn occurs and trading volume declines.

5 Real Networks

RNWK 89.94 556.2 67.7 41.7% 13.4 Internet
The maker of software that enables internet users to see and hear streaming media programming on the internet.  Faces competition from many other software makers (including Microsoft).  Current valuation discounts next 13 years of growth.

6. America Online

AOL 115.25 200.2 32.3 50.5% 3.96 Internet
S&P 500 member AOL is the only blue chip Internet stock.   The company's current valuation levels discount ALL growth out to mid 2003.   Company faces competition from Excite At Home and portals among others.
7.Lycos LCOS 99.81 301.1 38.5 52.9% 5.69 Internet
Lycos stock is making a run to overtake YHOO as the most overvalued portal.  Escaped recent internet sell off.  Merger hopes drove price up.  Stock price held up well during last month's Internet selloff.
8. CNET Inc CNET 49.81 152.2 56.9 46.3% 3.29 Internet
A leading internet portal and content player. producess the C/Net television program and the SNAP! portal among others. Trading at 56.9 times sales.  Current valuation discounts expected earnings growth out to 2002.
9.Go2Net GNET 89.25 419.6 209.8 28.0%


Communications Software

The company that brings you Silicon Investor.  GNET has added its name to the list of companies trying to strike it rich in the portal business.   Current valuation discounts the next decade of growth.
10 ETradeGroup EGRP 39.94 305.3 23.9 39.1% 7.81 Discount Broker
A brokerage firm that has been misclassified as a technology stock. The company, like all brokerage firms, is subject to the cyclical ups and downs of the industry.  When the current internet stock bubble bursts it will be hurt more than most--the "excitement" of online trading will lose its luster when the market enters a sustained change in direction.  Current price discounts the next 7 years of earnings growth.



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