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December 2, 1998

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Subject: Re: D.Gardner's response to AMZN indsiders
Author: BruceBrown

Cheeze wrote:

I do object to the phrase "blue chip internet stock." That's a contradiction in terms, in my opinion. Let's not lose sight of the fact that while the industry promises great things, no single company from AOL or YHOO on down can be considered a sure thing.

Nobody ever said or promised that a blue chip stock in any sector of the market was a 'sure thing' - Dow or Nasdaq. That's a really warped view of a blue chip if one thinks it is a sure thing. I don't want to get into my losses of 'thee' blue chip IBM a few years back...... :-(

However, within in each sector, finding the absolute leaders who appear to be the strongest in terms of their business model, growth, earnings, potential growth/earnings is pertinent. This is why in the 'infant of a sector' called Internet Stocks, AOL, YHOO and AMZN have come to the fore to be labeled as the 'blue chips'. Maybe 5 to 10 years from now we will all look back on it and laugh or cough our heads off. In the meantime, the reality is that they have obtained this label within the Internet Sector.

Of course it too soon and early in the growth phase to stack these 'blue chips' up with what one considers a standard 'blue chip' on the Nasdaq or the Dow. However, companies that are considered 'blue chips' within their respective sectors like Cisco, Dell, Nike, FedEx, Compaq, etc... are all young companies - very young historically speaking. What was Dell 8 years ago? What was FedEx 18 years ago? What was Cisco 5 years ago? Empty lots give or take a little construction time. Don't look at the Internet sector too lightly and rule out that there are and will be 'blue chip' companies within the sector. Not that I want AOL to run out and offer Tiger Woods and Michael Jordan 20 and 30 million dollars a year respectively to promote the company as of yet.

I understand your objection to the term 'blue chip'. AOL, AMZN and YHOO are setting the standard followed closely by LCOS and a select few others in this sector. No, not every company can win, but certainly there will be big winners with great management, business models and profits that will become known as the 'blue chips'. Yes, the risk is more agressive than what I feel is perhaps your definition of a 'blue chip'. Maybe you consider stocks such as MO, GM, GE, CHV, etc.... to be real 'blue chips'. Yet the potential is very exciting in the youthful Internet sector and certainly much better for the environment than this above list of 'blue chips' from the Dow. :-) One doesn't have to avoid the real blue chips to invest in the other 'blue chips'.

Just to add, I'm speaking of long term investing here, not the short time trading frenzy that has been going on. Sock away a small perencentage in a few of the potential leaders in the Internet sector and let it sit for a few years.


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