The recent frenzy over the flotation of 20% of Dixon's Freeserve has been fascinating to watch. Its ...
The recent frenzy over the flotation of 20% of Dixon's Freeserve has been fascinating to watch. Its success has continued to emphasise that interest in computers, the internet and e-commerce is no longer the domain of young pony-tailed software developers and computer geeks.
Since its launch last September Freeserve has fuelled a growth of internet users in the UK and has unleashed a herd of other businesses keen to exploit the opportunities of the internet and e-commerce.
UK investors should try to identify industries or themes that are going to provide trend growth for several years. We feel particularly strongly that the internet is the current investment theme in the UK with the greatest potential for growth.
The internet will have a profound effect upon today's modern industrial society. With its ability to reach consumers all over the world e-commerce will affect all our lives making shopping for many goods and services cheaper and more convenient. This will transform the way businesses operate, communicate with each other and sell to their customers.
Just think back to how the invention of the motor car altered shopping, urban design, productivity and many other areas of society. This explains the excitement behind internet stocks. The internet has seen rapid growth in terms of the number of surfers and is forecast to become the dominant medium in the next century. On-line penetration of European homes is expected to reach almost 35% by the end of 2002.
Not surprisingly, this has led to companies, and investors, focusing on the advent of e-commerce and what it will mean for growth and profit forecasts for stocks benefiting, and not benefiting, from this technology.
The ability of established companies to adapt to this communications revolution will determine the winners from the losers. Let us not forget that it is just as profitable to move your investments out of harm's way as discovering that new IPO-related wonder stock.
The areas of the market most readily affected will be those closest to the consumer. It will pose a serious threat to companies in sectors such as finance and general retailers.
For instance, Marks & Spencer will suffer from their ownership of large retail premises unless they can start selling through the Net and reduce their high overheads
Talk of the overvaluation of internet stocks should not deter UK investors from gaining exposure to companies which exploit the opportunities of e-commerce. Nor should they be deterred by the problem that all the best known companies in the sector are American. Investors can benefit from investing in UK companies in many different industries with strong brands and innovative managers who can take advantage of this new technology and provide growth over many years to come as the internet comes to maturity. Currently, the best way to gain exposure to the internet and e-commerce in the UK and Europe are infrastructure plays, principally telecoms companies. Each link to the internet requires a telephone line and, combined with growth from other areas including mobile telephony, the whole industry is well-placed for growth.
Opportunities for the UK investor to invest in the potential of the internet and e-commerce are multiplying.
As Lou Gerstner, CEO of IBM, recently described it the new .com companies are like "fireflies before the storm all stirred up, throwing off sparks. The storm that's arriving the real disturbance in the force is when thousands and thousands of institutions that exist today seize the power of this global computing and communications infrastructure and use it to transform themselves. That's the real revolution.
Christian Elsmark is a director at Fleming Investment Management.
Three years at Wells Fargo
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