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Giovanni DiMauro
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Giovanni DiMauro, Founder of uncovering select special situation stocks. California Real Estate Broker CEO and President of Gibralter Financial and Real Estate Services from 2001 to 2008. CEO of All Valley Mortgage 1993-1995 Private investor, Author and trader from... More
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  • Are Internet Technology Stocks Ready For A Correction? 0 comments
    Nov 13, 2013 4:52 PM | about stocks: AAPL, PNQI, TWTR, YHOO

    Last week's IPO of Twitter (NYSE:TWTR) was a display of irrational exuberance at its finest! Did we witness the peak of the recent internet bubble? Will Facebook (NASDAQ:FB) and Twitter rule the world? That remains to be seen.

    Throughout the day, analysts on CNBC, Bloomberg and Fox Business gave their insight in relation to the value of this new IPO. Could it possibly be worth more than Coach (NYSE:COH) and Tiffany (NYSE:TIF) combined?

    After pricing the offering at $26 a share, Twitter opened in the mid $40s and promptly ran to $50 within the first hour, before pulling back and closing the day around $45 a share. Are they deserving of an outlandish value of 17 times forward gross revenues for 2015 or 2016? Will the stock reach $50 again in this decade? Here is a 30 minute chart of Twitter.

    (click to enlarge)

    Twitter may be loved by the masses, but when will another well capitalized tech giant come along and challenge their market? Important questions to consider before investing in this company.

    Look for solid businesses, with real earnings, and consider selling some internet stocks right here. They are at multi year highs, and many are trading at extreme valuations. As a trader that was in the market through all the wild swings of 2000, and 2008, I can tell you the pain on the downside is not worth the risk of jumping into high flying IPO stocks that have no income.

    Apple (NASDAQ:AAPL) on the other hand, is a company with phenomenal earnings and good solid growth. The share price rallied to a high of $705 in September of 2012, seven months later the stock was trading at $385, a 45 percent drop. Apple is currently in the $520 range. This is a company with incredible earnings and great products loved around the world. While I believe it is a good investment here, the share price dropped $320 from the peak. Look at this chart.

    (click to enlarge)

    Investment advisors talk about taking the long term perspective. Yahoo (NASDAQ:YHOO) rallied up to $125 in January of 2000, only to plunge 96% to $4.50 a share in 2002. This chart illustrates massive long term pain for anyone invested near the top.

    (click to enlarge)

    180 month Chart on Yhoo

    Yahoo appears to be reclaiming the $30 range where it traded from 2004 to 2006. Thirteen years later, the share price remains 60% from the 2000 peak. Is it time to sell?

    Check out this chart of PWRSHRS NASDAQ INTERNE, (NASDAQ:PNQI) this fund has been on a tear and is trading near all-time highs. While it may go higher in the short term, this ETF is ripe for institutional profit taking.

    (click to enlarge)PWRSHRS NASDAQ INTERNET PNQI


    While there are some great companies in the technology space, valuations are at multi year highs. No one rings the bell at the top. Be cautious, know your exit point, do your due diligence and make good sound investment decisions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Stocks: AAPL, PNQI, TWTR, YHOO
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