The subprime-lending fallout seems to be hitting just about everywhere these days. What began as a smattering of casualties among the risky lenders themselves has engulfed the entire market with more mood swings than a Chicago Cubs pennant race.
However, there have been surprising signs of strength from the dot-com stocks, which typically go down with the ship. For instance, yesterday's biggest Nasdaq gainer was none other than The Knot (Nasdaq: KNOT). Shares of the leading online wedding-resource provider soared 25% on an otherwise dreary trading day. The company blew past Wall Street's profit projections a day earlier.
The Knot's robust showing came just days after Blue Nile (Nasdaq: NILE) -- the high-end jewelry retailer that has become the place to go on the Internet for upscale engagement rings -- also topped per-share profit forecasts by a nickel.
I'm stoked. They both happen to be Rule Breakers newsletter recommendations, and they've been on fire lately. The Knot has nearly doubled since I singled it out to subscribers last year. Blue Nile has nearly tripled since David Gardner originally recommended it three years ago.
Go, cyber, go
Watching companies like The Knot and Blue Nile take off during a rocky trading week is impressive. It's also refreshingly surprising. Think about it. If subprime sneezes, shouldn't these companies also catch a cold? Let's connect the dots here. Lenders that were making risky loans with deceptive teaser rates or exotic mortgage terms are now coping with borrowers that took on more debt than they are capable of paying off.
The defaults are plenty, and the repercussions are obvious. It's more than just FICO going FIFO. All lenders are bound to be stingier in the future, making it tougher for new couples to land their perfect dream houses.
Wouldn't that mean that folks about to get married have to be a little more watchful of their dowries and pennies? Maybe that translates into cheaper engagement rings and wedding bands. Maybe that means skimping on a live band at the wedding and letting Cousin Jimmy hook up his iPod to a set of speakers.
That is where logic would lead you -- hitting Blue Nile's rings and The Knot's lead-generation business in the garter -- but the numbers tell us otherwise. The companies are humming along just fine. Heck, better than fine.
Beyond the vows
The Internet is providing high-margin ways to deliver access to information and -- for now, at least -- its biggest stars have been immune to the subprime epidemic.
That could explain why the basket of high-growth Internet, biotech, disruptive technology, and consumer-driven stocks that make up the Rule Breakers scorecard is doing so well right now. As of yesterday's close, the average pick is up 29.8% relative to the S&P 500's more modest 13.4% advance.
It's not just two dot-com standouts, either. Priceline.com (Nasdaq: PCLN) also soared past the Wall Street tarmac this week with market-thumping results. Even a Web-kind dog like Vonage (NYSE: VG) had its day on Thursday, with a surprisingly upbeat quarterly report.
Even some of the non-sector players are catching on. How else would you explain a debt-strapped company like Blockbuster (NYSE: BBI) turning heads after it announced that it would be acquiring digital downloading pioneer Movielink this week? The lifeboats are there for investors bailing out of the S.S. Subprime and into the HTTP Tomorrow.
We can probably go all the way back to Amazon.com (Nasdaq: AMZN) setting the tone with its better-than-expected report two weeks ago. Thankfully, the rest of the sector is taking the baton and running with it. The subprime shakeout may eventually rattle all the way down to dot-com's virtual bones, but we're not seeing it -- feeling it -- yet.
Amazon.com and Priceline have been recommended to
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subscribers. The Knot and Blue Nile are
Rule Breakers
newsletter service stock selections. Free 30-day trial subscriptions are available for both stock research offerings.
Longtime Fool contributor Rick Munarriz respects lifeboats. He does not own shares in any of the stocks in this story, unfortunately. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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