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
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
filmIdris Elba responds to James Bond rumours on Twitter
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
PROMOTED VIDEO
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
Sport
Wayne Rooney warms up ahead of the English Premier League football match between Tottenham Hotspur and Manchester United at White Hart Lane
football
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
Arts and Entertainment
Lena Headey as Cersei Lannister in Game of Thrones
film
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
Danielle George is both science professor and presenter
people
News
i100
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

    Recruitment Genius: Marketing Assistant

    £18000 - £22000 per annum: Recruitment Genius: Do you have previous experience...

    Recruitment Genius: Accounts Administrator

    £16000 - £18000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: PHP Web Developer

    £30000 - £50000 per annum: Recruitment Genius: Are you a Web Developer looking...

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Day In a Page

    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?
    Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

    Finally, a diet that works

    Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
    Say it with... lyrics: The power of song was never greater, according to our internet searches

    Say it with... lyrics

    The power of song was never greater, according to our internet searches
    Professor Danielle George: On a mission to bring back the art of 'thinkering'

    The joys of 'thinkering'

    Professor Danielle George on why we have to nurture tomorrow's scientists today
    Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

    Monique Roffey interview

    The author on father figures, the nation's narcissism and New Year reflections
    Introducing my anti-heroes of 2014

    Introducing my anti-heroes of 2014

    Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
    DJ Taylor: Good taste? It's all a matter of timing...

    Good taste? It's all a matter of timing...

    It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
    Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

    How we met

    Olivia Jacobs and Ben Caplan
    Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

    Bill Granger's healthy breakfasts

    Our chef's healthy recipes are perfect if you've overindulged during the festive season
    Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

    Who does your club need in the transfer window?

    Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
    The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

    Michael Calvin's Last Word

    From aliens at FA to yak’s milk in the Tour, here’s to 2015