CNBC’s David Faber speaks with Philippe Laffont, Coatue Management founder and CIO at the Robin Hood Foundation’s investors’ conference, about whether we’re seeing another internet bubble.
Video and transcript below
are we in an internet bubble? a good question, david. and thanks for having me. pleasure. when you look at the stockperformance and you see netflix up 200% and yelpp 200%, itreminds you of 1999, and i started in 1999. so the bubble is near and dear to me. but when you look at the valuations — the large internet companies, 20 times earnings for 20% growth, and i think the rule of thumb, 20-for-20 is a good metric to invest. so on that say, i would say, no. some of the smaller companies, like netflix, linkedin, some of the new ones, even, like, facebook, the earnings are very high, but the business models are changing. so i’m reasonably optimistic on those two. but it’s definitely — the earnings multiples are fairly high.yes, exactly. not to mention twitter, which is not yet public — which is not yet profitable, recently gone public. yes. so in those cases, you have to figure out, what could the earnings and the revenues be five to seven years out? as you said, today, they’re not even profitable. a key thing i think a point you made in your presentation as well, though, we talk aboutinternet stocks. there aren’t that many megacap internet companies, despite what is an enormous market, so tospeak. yes, that’s a great point. when you look at the largefinancial companies, there’s 400 financial companies that have a market cap of greater than $5 billion, and 40 that havemarket greater than 50. there’s only seven large internet companies — there’ll be an eighth one when ali baba when it goes public — but there are very few. that’s why we like the sector so much, because there’s few companies that’s sort of a winner take all. if you can be one of the eight companies, you have incredible opportunity — where do you draw the line,though, on what’s an internet company, given every business isinvolved in the internet? yes. i would say — and that’s also agood point — i would say it’s the companies that predominantly, most their business is transacted through computers, so that they don’t have a lot of inventories, don’t have a lot of factories, they don’t have a lot of people. most of the businesses, i placean order on the website, and then some goods or services –ebay. amazon, ebay, google, linkedin, twitter, facebook. and then there’s some incredible foreign companies, 10 cent, alibaba, and bidu in china. ali baba going to go public