Top Internet Stocks

Written By Brian Hicks

Posted December 8, 2008

During the Depression, my grandfather broke rocks for a living.

The massive Works Progress Administration gave him a job turning out gravel for roads, extending economic access deep into communities ravaged by the Dust Bowl. It was backbreaking work, but it needed to be done, and—in some small measure—it helped the country recover.

Today, the United States is suffering millions of job losses and trying to pull out of a consumer spending tailspin. Both our own past and other countries’ present economies point to high-speed Internet as the best way to expand economic access and recover from a severe recession.

Crushed rock stocks did rise on Monday December 8, after President-elect Obama announced a massive infrastructure spending campaign. Three composite rock companies, Vulcan Materials (NYSE:VMC), Martin Marietta Materials (NYSE:MLM) and Eagle Materials (NYSE:EXP) all rallied to double-digit percentage gains on the Obama plan.

If you’ve been long gravel, it was a good day…

But Internet stocks may see the most substantial long-term benefits from Obama’s planned public works spending.

The U.S. is #15 in Internet Access?!

It’s no coincidence that Obama is comparing his plan to the construction of the Interstate highway system under Einsenhower. Marshalling the expansion of Internet availability is just as far-sighted, and probably more powerful in its benefit.

Just as Detroit is touting its own multiplier effect in Washington-saying that between seven and ten jobs revolve around every Big 3 position-broadband advocates can rightly point to a ripple that spreads from Internet access points.

Speaking on December 6, Obama showed his appreciation for the Internet’s larger context as essential infrastructure, saying, "It is unacceptable that the United States ranks fifteenth in the world in broadband adoption."

It’s not that the U.S. hasn’t done its part in developing the online economy. Out of the dot-com boom and bust we got web titans like Google and Amazon, and developed entire new media markets surrounding just one small device—the iPod.

Yet the U.S. is behind over a dozen countries in the percentage of population with high-speed Internet access.  France, South Korea, the U.K., and neighboring Canada all beat us out, and that amounts to a competitive advantage for them in an environment of contracting GDP growth.

Obama’s Broadband Stimulus

Broadband can and should be applied to all industries to make the economy leaner and more productive.  Obama noted that another major problem area-health care-can be helped greatly by better Internet integration.

"We will make sure that every doctor’s office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year."

Government spending to increase high-speed data coverage on one end of the national balance sheet can limit public health costs on the other…

Since interest rates have nearly bottomed out, what we need is smart spending, and new spending that brings fresh participants into a booming commercial sector.  Young people who have grown up entirely in the Internet Age can be prime movers here, so Obama links our future economic health to wiring educational institutions.

"To help our children compete in a 21st century economy, we need to send them to 21st century schools," he said Saturday.

And the telecoms industry is eager to play a part in service expansion to unserved areas.

A plan to map existing Internet access in the U.S. was already enacted by George W. Bush, and broadband proponents say Obama could make that a base for aggressive development.

Union leaders from the Communication Workers of America got together with executives from AT&T and other companies early in December to voice a "call to action" for greater broadband commitment.

Top International Broadband Internet Stocks

Pushing to give every citizen an Internet hookup can’t only be thought of as an internal matter. The government should also act carefully with regards to contracts and eschew the cronyism and no-bid contracts of the past eight years.

The Obama Administration would do well to look to the nations ranked above us in broadband penetration for examples and guidance.
In South Korea, I visited the offices of Gmarket (NASDAQ:GMKT), an online marketplace where residents of large cities like Seoul can order all their household needs with a click of the mouse.

Different retailers post their prices, and you choose where your money goes. It’s pretty straight-forward capitalism.

But looking over Gmarket’s balance sheet, you see terms like Gross Merchandise Value (GMV) that pop up almost exclusively in e-commerce because other measures aren’t representative of the broad range of goods and services Gmarket carries. This is a place where many analysts are behind the curve in even understanding what powerful companies new e-commerce firms are.

Ebay (NASDAQ:EBAY) grabbed a chunk of Gmarket within the past year, appetized by Gmarket’s consistent GMV growth, and Global Growth Stocks subscribers profited from the trade in a few short months. Really, though, Gmarket is less similar to the auction site eBay and more like Amazon (NASDAQ:AMZN), an online marketplace which should reap the long-term rewards of high-speed expansion.

Another international broadband internet stock I’ve tracked for years in GGS is Brazilian broadband and cable TV company Net Servicos de Comunicacao (NASDAQ:NETC). NETC is pushing Internet service in one of the world’s fastest-growing markets, where it’s common for a person’s first phone to be mobile and new music circulates on MP3 drives throughout Rio’s slums. NETC stock has fallen with the rest of the market this year, but the company has continued making advances throughout Brazil’s cities and rural areas.

For a Stateside bet, you can be sure that Google (NASDAQ:GOOG) will be at the forefront of Obama’s broadband buildout. CEO Eric Schmidt may soon be dubbed the first Chief Technology Officer in U.S. history (or some such title), and the company’s Silicon Valley headquarters will play a key role in the new electric vehicle infrastructure plan, Project Better Place.

And let’s not forget that Barack Obama’s campaign momentum came from energetic Internet organizers. His transition team’s is expected to stay active for years to come.

Let’s hope that high-speed Internet is a lasting change we can count on.


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