Personal Finance: Will the Net `bubble' last?

SOMETHING IS going on. There is no doubt about that. Are we watching the biggest market bubble since the Dutch went bananas about tulip bulbs or is there, as the cognoscenti like to say, a paradigm shift going on?

Earlier this week Dixons, the electrical chain, confirmed plans for a separate flotation of Freeserve, its free Internet service, which has racked up more than one million new customers since launch in late 1998. Valuations of Freeserve range from pounds 1.8bn to pounds 3bn.

Is Freeserve - and the many other Internet-linked firms whose dizzying rise in share prices have confounded stockmarket experts - really worth that much?

On 19 April, some Wall Street watchers thought the crash had come. The 15 constituent companies in the Dow Jones Internet Commerce Index fell by a record 17 per cent while the technology-heavy Nasdaq Index recorded its second-worst points fall, down 138.43 or 5.6 per cent. Yet, since then, it has been back to normal for many Internet stocks, taking the up elevator.. Two days later Nasdaq roared up 6.1 per cent.

The Internet feeding frenzy has been mostly an US phenomenon, but it has not entirely passed the UK by. On 1 January, 1998, the new FTSE Information Technology sub-index began. It had a bumpy ride last year but managed to outperform the FTSE All-Share by about 25 per cent.

In the first three months of 1999, Dixons itself was the FTSE 100's top performing share.

On 1 April this year, the FTSE International set up the Internet Index, with just eight shares, six of which are listed on AIM (the Alternative Investment Market). One, AIM-listed firm, Voss Net, that markets e-commerce software, was the London market's top performer in March, up almost 140 per cent. Other firms in the new index are: Dialog Corporation; Gresham Computing; Easynet; Intelligent Environment Group; Internet Technology Group; Netcall, and VirtualInternet.net.

As with many Internet investments, there are big promises of jam tomorrow. Edward Forwood, of stockbroking firm Durlacher, admits: "There is an element of speculative bubble", and believes it would be very difficult for private investors to pick the eventual Internet winners over other companies that he writes off as a mixture of "doggy and dodgy".

Most of the few Internet firms with stock market quotations have actually floated only a small proportion of their shares. Lack of supply has helped boost prices to stellar heights. Which brings us back to Dixons, now considering the flotation of its Freeserve subsidiary, apparently.

As a pure Internet service provider Freeserve might be worth maybe pounds 250m, according to analysts at Fletcher Research, but as an e-commerce provider in the future it is likely that you could add at least another nought to that number. In fact, William Reeve, at Fletcher Research says: "Freeserve's relationship with its users is deeper than merely as a website, so it may be able to aspire to become a major e-commerce player," and he suggests a possible value of around pounds 3bn.

The next question is how much of your hard-earned savings should you consider putting into Internet stocks? - as a private investor, only the gambling money that you can afford to lose.

Edward Forwood of Durlacher says individuals looking for exposure to the internet should consider Framlington's new NetNet fund, launched in April. It is the first UK-based unit trust dedicated to investing in Internet and Internet-related companies. You may invest from pounds 1,000 as a lump sum, or from pounds 50 per month. It is managed by the same team that set up an US-based Internet fund in August 1996: that's grown by an annualised 106 per cent since then.

The NetNet fund, available in both Maxi and Mini ISAs, as well as a unit trust, aims to invest roughly 40 per cent in pure Internet plays, such as Amazon and eBay, with the balance being in other companies which either generate revenue through the Net or have a strategic commitment to it. The fund has an annual management fee of 1.75 per cent with an initial charge of 5.25 per cent.

NetNet Fund: www. framlington-netnet.com

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
News
i100
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Maths Teacher

    £110 - £200 per day: Randstad Education Leeds: Secondary Maths Teacher for spe...

    Business Analyst - Surrey - Permanent - Up to £50k DOE

    £40000 - £50000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    ***ASP.NET Developer - Cheshire - £35k - Permanent***

    £30000 - £35000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    ***Solutions Architect*** - Brighton - £40k - Permanent

    £35000 - £40000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker