Internet Mania

By CBSNews.com staff CBSNews.com staff

January 20, 1999 / 9:17 AM EST / CBS

Most people know about the wild ride in "dot com" stocks. A number of companies with Web-related businesses have made initial public offerings recently only to find their stock prices increasing wildly within their first hours and days on the market.

Take a look at Amazon.com, the book and music site. If you bought ten shares just a year ago, you paid about $92. If you sold your shares when the company was at its high for the year, just a couple of weeks ago, you'd have made more than $5,900.

The appeal of quick money keeps investors pumping money into these companies without doing the usual homework in selecting them. CBS This Morning Money Editors Ken and Daria Dolan have some tips for investing in this sector.

"It sure is a very exciting sector of the market with many investors looking to get into the feeding frenzy of Internet stocks," says Ken Dolan. "And 1999 could conceivably be as busy or busier than the sector was in 1998."

"Five million investors trading online and many others dealing through their brokers have created an Internet stampede," he says. "But the problem with joining a stampede is that it is hard to predict when and which stocks to pick right now."

There is no simple formula for picking an Internet stock, Daria Dolan says. "The truth is you have to do homework," she says. "You have to look for real sales, real profits, and solid management just as you would in picking any stock."

One company that has that solid look, the Dolans say, is America Online. It has been public since March 1992. It's made strong, steady growth. Some analysts refer to it as the blue chip of Internet stocks. It was just included in the Standard & Poor's 500 stock list, a list that is often considered to reflect the cream of the crop.

If you don't like to take huge risks but still want to invest, Ken advises: "You should consider buying into an Internet mutual fund. These funds were the best performing funds in 1998, which of course doesn't mean they'll keep performing at those levels. But the beauty of an Internet fund is that the fund isn't relying on one or two individual stocks to produce profits."