The Danger of Surfing Stocks: You Can Wave Your Money Goodbye
One of Wall Street's favorite expressions is "The trend is your friend." What this catchy little saying means, of course, is that if you divine the direction the financial markets are taking, you should go with the flow and make money.</br></br>The only problem, though, is that riding the waves of financial fashion is a lot easier said than done, as the financial trendsurfers who have been loading up on smallish technology stocks are finding out.</br></br>Until recently, lots of investors thought this particular wave had a long way to go. Weren't computers and the Internet the coming things? Who wanted to listen to those boring skeptics who thought that a company should actually show a profit before being valued at billions of dollars in the stock market? Surprise! In the past few weeks, lots of tech stocks have turned from "Endless Summer," the famous surfing movie whose stars found the perfect wave, into the Surfaris' "Wipeout."</br></br>The Nasdaq index, heavily weighted toward technology, closed yesterday at 1182.90, down 5.3 percent from its high on June 5. That may not sound like much, but it's the equivalent of the Dow Jones industrial average falling nearly 300 points.</br></br>But that drop is a mere bag o' shells, as W.C. Fields used to say, compared with what's happened to some individual stocks that have been thoroughly drilled lately. A few examples: America Online Inc., the world's biggest online services company, closed yesterday at $42.12 1/2 a share, down almost 40 percent from its May 7 high of $70. Iomega Corp., which makes a dandy new computer disk drive, closed at $29.37 1/2, down 46 percent from its high on May 22. Lycos and Excite, which make search engines to help folks navigate the Internet, are down 48 percent and 52 percent, respectively, from their peak prices in April.