CMGI, Internet Capital Group Flashback

I don't think Santayana got it quite right. In most cases, history does not repeat itself, but it sure as heck rhymes.

This time, though, it's the same cast of characters, the same plot, and I'd even venture to guess the same ending. The only question in the middle is how long the current stanza runs. If you are one of those crazy "quality focused" investors, maybe it's best that you stop reading this now. Because two of the biggest cash sucks of the 1990s have suddenly garnered a great deal of attention. Perhaps you remember these names -- CMGI (Nasdaq: CMGI  ) and Internet Capital Group (Nasdaq: ICGE  ) ?

The kind of attention they're getting isn't based on earnings -- they have none. It isn't based on cash flows -- again, no such thing exists. It isn't even really based on prospects or promises or hyping by Wall Street analysts. No one covers either company.

As best I can figure, CMGI has surged forward based on a marginally positive mention on a television show. Internet Capital Group doesn't even have this excuse. About the only thing I can point to is a massive move upward in eMerge Interactive (Nasdaq: EMRG  ) , a livestock supply chain company that has doubled in the last week following the latest mad cow scare. ICG owns 18% of eMerge, valued on the market at about $23 million. Last week, ICG quickly doubled and then trended back down to earth.

Granted, these companies are a far cry from where they were in 1999. ICG's market capitalization reached nearly $40 billion -- it added nearly $20 billion in the month of December that year. It currently sits at $192 million. CMGI descended from similar market-cap heights to levels of about $250 million, but has since rallied above the $1 billion mark. There was a time when I believed in the CMGI model, even holding the stock during some of the insanity. But there isn't much evidence that the company or its investees have turned the corner at all. They're not making money, not even close.

The stock surged last week to the sound of crickets chirping, based on the fact that someone stated that its chart looked good. Every company that isn't in danger of going out of business is a "buy" at some level, but $1 billion, based on little more than someone noticing that other people were buying the stock?

Maybe we should call up the New England Patriots and see if it's not too late to rename their house CMGI Field. I'm sure they'd appreciate the flashback as well.