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

News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
News
news
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
  • Get to the point
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

    Ashdown Group: Senior Accounts Assistant - Accounts Payable - St. Albans

    £26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Recruitment Genius: Installation and Service / Security Engineer

    £22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

    Recruitment Genius: Service Charge Accounts Assistant

    £16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions