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THE DAY AHEAD: Dot-coms rebound may be short-lived

COMMENTARY--If you took a stand on April 1st and told all your pals to buy dot-com stocks, you probably would have gotten quite a chuckle and a few referrals to get counseling. After all, it was April Fool's Day.

But if you had bought dot-com stocks on or after April 1, you would have been laughing all the way to the bank--at least until May 4 or so.

From April 1 to May 4, dot-com stocks went on a tear. CNET Networks Internet Services, Internet Content and E-Tailing indexes posted gains of at least 18 percent from April 1 to May 4. The E-Tailing index jumped a whopping 41 percent led by At least that explains why CEO Jeff Bezos was laughing so much on CNBC.

Now we're hardly going to proclaim the return of the Internet glory days, but it's a notable little trend. Of course, the gains may be merely a "dead cat bounce," a situation where stocks rally from the basement to get to the first floor. It's also worth noting that most of these stocks fell from the top floor of the World Trade Center. Indeed, a few of these dot-com rebounds were 25-cent moves, but a gain is a gain.

To wit:

• Among Internet content players (Nasdaq: GOTO) jumped from $7.37 to $21.92, 197 percent, from April 1 to May 4. InfoSpace (Nasdaq: INSP) surged 146 percent, from $2.03 to $5, in that same time period. Ask Jeeves (Nasdaq: ASKJ) finally found an answer to its weak stock price and jumped from $1 to $2.24. iVillage (Nasdaq: IVIL) doubled from 50 cents to $1.06. Yahoo (Nasdaq: YHOO) was up 44 percent.

The list goes on and on. Even jumped 60 percent, or 15 cents to 25 cents. With those TheGlobe gains, you could take the proceeds and buy a pack of gum. TheGlobe has been delisted from the Nasdaq national market.

• Among the downtrodden Internet services companies, Razorfish (Nasdaq: RAZF) jumped 46 cents to $1.25, or 167 percent, from April 1 to May 4. CMGI (Nasdaq: CMGI) surged from $2.39 to $6.22, or 160 percent. Maybe those Internet incubators are coming back. A host of other companies posted impressive gains, even though we're talking jumps from a few cents to $1 or so.

• Among Internet retailers, the biggest gains were registered by Expedia (Nasdaq: EXPE), which actually deserved a nice pop given that it reported a profit. Shares of Expedia jumped from $13.87 to $31 from April 1 to May 4. Expedia rival (Nasdaq: PCLN) surged from $3.06 to $6.08 after projecting an operating profit in the current quarter. Amazon was up 93 percent from $9.10 to $17.56. Nothing like a lot of spin and three different ways to report a loss to get things moving.

Like the other dot-com players, e-tailers in the soon-to-be-delisted club had nice runs. A 6-cent investment in E-Stamp would have given you 22 cents. A 21-cent April 1 investment in would have brought home a 37-cent return. And a bet on one share of on April 1 would have given you enough dough to buy a big Snickers bar. I'm getting hungry already.

Not to kick a dead dot-com when it's down, but most of these stocks are a gamble to say the least. You'd be better off at the roulette table.

But there are a few standouts that deserve some praise. GoTo has proven that its pay-for-performance ad model works nicely. Wall Street also upgraded GoTo shares after the company's strong first-quarter report.

Expedia is also delivering the goods and leading online travel stocks. As for Yahoo and InfoSpace, investors seem satisfied that these stocks have hit bottom. Overall, the big dot-com names are leading the way.

"Many investors are asking if this gain was justified by fundamentals or if it was overoptimism that will be corrected. We believe this gain represented the market's attempt to establish a floor for the key Internet names," said Safa Rashtchy, an analyst at USB Piper Jaffray.

The key word in Rashtchy's assessment is "key" Internet stocks. It's safe to say that gains for the penny-stock crowd just show that a little market timing can work once in a while. But market timing seldom results in happiness. To catch this dot-com run, you would have had to buy on April 1 and bail a few weeks later. Many investors never time these things right--just look at the folks who rode these former high-fliers all the way down from the highs.

Simply put, April's dot-com magic could be short-lived. Many of these one-month stars are already losing steam a week after we took our sample. Hopefully, you took some of your extra pennies and ran off. TDAIN

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