Internet Stocks To Continue Their Uptrend
Dalal Street Investment Journal|January 18, 2021
Internet-based stocks have been the talk of the town in 2020. Indeed, with the lockdown in various parts of the world, it was the internetbased stocks which reaped in the ‘moolah’ for its shareholders. After a decent performance in 2020 the dilemma faced by investors is whether these high-flying stocks of 2020 will move forward in 2021 as well or will they retreat? The DSIJ team discusses the outlook for the internet stocks in India

The IT and pharmaceutical stocks glorified the year 2020 and indeed the cyclical stocks and value stocks managed to make a comeback in the second part of 2020. What many investors may have missed is the performance of internet stocks on the Indian bourses. As a group, the internet stocks are a small group with low market capitalization and are nowhere near its peers in the IT sector. Hence, these set of stocks do not regularly hit the headlines and are not owned by the investing population. Most of the internet stocks are also complex in terms of their technology and products and often it is not easy to decipher the business models of these modern, hi-fi internet companies.

The old generation investors especially find it extremely difficult to ascertain value in the stock. Says Chetan Nayani, an old-time investor in the share market who has seen the dotcom bubble: “I have been active in the markets since 1987. I have seen many business cycles and I have seen businesses go bust and at the same time some businesses have grown manifold. I find it extremely easy to ascertain value in stocks like Gujarat Ambuja, Larsen and Toubro, Nestle, etc. It is easy to evaluate such stocks as the assets are tangible and forecasting the business cycle is relatively easy in such kind of stocks. The cash flow is also relatively easy to predict. The thing with most of the internet companies is I do not understand how they make money and where are the profits coming from.”

“I wasn’t too keen to invest in them but then these types of stocks keep making positive noise and their performance on the bourses is very encouraging. Therefore, I have decided to invest some additional efforts to understand these stocks and make some portfolio allocation to such internet companies. However, in my mind I am sure not to park more than 5 per cent of my total portfolio in such stocks simply because I find it difficult to understand these set of stocks,” he adds. Indeed, buying internet stocks is not everybody’s cup of tea. What are internet stocks anyways? Simply put, internet stocks or companies are organisations that offer its services exclusively on the internet.

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