Internet Infrastructure Stocks on a Tear

Internet infrastructure stocks are on a tear. Indeed they are veritable "pitbulls on the pantleg of opportunity" following a set of strong Q1 results and broadly encouraging guidance.

Bear in mind that if you view these charts after this writing - 30 April, 2009 - they may look very different, but what they show now is Akamai (AKAM) up 10% Thursday, Savvis (SVVS) hanging tough after a 16% rise Wednesday and having more than doubled since its March lows, Switch & Data (SDXC) has also doubled, Rackspace (RAX) up 74% since early March, and Equinix (EQIX) up 68% since its own March nadir.

I know a rising tide generally lifts all boats (NASDAQ up 41% over the same period), but these have gone airborne. We're back to "picks and shovels" here, but I think this time the market has it dead right.

The magic of flipping a light switch and escaping the dark is experienced at home, but the real magic takes place in an unseen power station miles away. The magic of Facebook actually happens in a number of deeply un-sexy, harshly-lit, sterile rooms with well-above-average air conditioning. Without the humble server jockey, tending his flock of racks, the code geeks got nothin'. Our dependence on web services of various flavors will inevitably intensify from here (especially if we end up working and studying more from home), and I would be very surprised if the critical infrastructure components of what the father of the internet, Senator Ted Stevens, once sagely called "a series of tubes", did not continue to grow strongly throughout this downturn and beyond.

I think this pie could get very high indeed.

Disclosure: No positions

Comments

[Mick Weinstein:]

A return to fundamentals (in all ways) at the start of an upturn?

May 01 03:36 AM

[Royal Arse:]

"Without the humble server jockey, tending his flock of racks, the code geeks got nothin'."

Great touch to an otherwise solid article. Being long technology (*of the belief that tech, commodities and financials will lead us out of the recession) demands you consider investing in the fundemental infrastructure required to make it 'go'.

May 01 10:21 AM

[ginchinchili:]

Like every other investment analyst, professional and amature, you've ignored a stock that makes your "pitbulls" look like cowering chihuahuas (no offense to chihuahuas and their owners; that includes Mickey Rourke). Take a look at General Cable (BGC). It's up over $33.00 a share from its November low of $7.62, and considering that the world is moving toward alternative energy and a lot of energy grid "updating," General Cable's future couldn't look better.

Why does every analyst ignore this stock? They've got great international exposure; their management team is efficient, smart and aggressive; they've got a billion dollars for internal and acquisition expansion; and a great R&D department that recently applied for a patent on their newly developed GenSPEED® 10 MTP™ Category 6A 10 Gig cable, featuring the Company’s patent-pending Mosaic Crossblock ™ technology (yes, that was copied; my memory isn't that good). This company doesn't have to rely on US sales to keep up its strong revenue stream, even so, its North American sales are up and will continue to strengthen over the next 2 - 3 years. What's there not to like? Ignore this company at your own financial loss.

May 01 01:07 PM

[Lightway:]

Technology was different in the 1999 market. ANY technology was all lumped together as short term, capital growth. trading plays.

However, technology of today has matured into a two categories.

1) Emerging technology
2) Technology infrastructure

You could think of the technology in #1 as the Facebooks, the Twitters, etc. Most of these technologies won't be around for the long term, but there are a few that break through, create disruptive impacts, and stick around for the long term. You can think of these as biomed type of investments.

The second group, in #2, could be thought of as utilities, they are very boring, and often don't get much exposure, yet their infrastructure provides the means for every emerging technology to exist. This space includes established players, like IBM, Cisco, HPQ, even Verizon and ATT crossover into this space.

There is alot of exciting things brewing up for Web 3.0 and Web 4.0, that will be transforming our lives over the next 20 years. The whole key is further integration, not only from a technological standpoint, but from a social aspect as well.

Alot of talk about the Cloud, but I see the Grid as having even more impact than the Cloud ever will. Check out Xtreemos, for example, sponsored by the European Commission, which brings real time grid computing dispersed OVER geographical areas. There is batch computing that does this, but this brings REAL TIME WAN grid computing to both big organizations and individuals alike.

www.xtreemos.org/

May 01 06:16 PM