'OLD ECONOMY' STOCKS USING NEW IDEAS (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

You've probably heard or read something about "new economy" stocks. But what exactly are they? Is "new economy" just a fancy term for companies that have something to do with the Internet? And what about "old economy" stocks? What are their prospects for the future?

To begin with, the new economy stocks are basically defined by their chief asset, which is intellectual capital. The general public typically defines new economy stocks as technology stocks. In contrast, old economy companies are those brick and mortar firms that either produce tangible products or deliver services through traditional means.

For the past couple of years, new economy stocks, particularly the "dot.com" companies have been grabbing headlines and attracting a lot of notice from investors. This surge of interest reflects the public's accurate perception of the increased importance of the Internet in many aspects of our lives. However, in their eagerness to "catch the technology wave," some people may be overweighting their portfolios in new economy stocks. Many of these companies are trading at extremely high price/earnings (P/E) ratios, which means that investors are paying a very high premium for these stocks, in the hope of significant price appreciation. Yet, some of these companies have yet to show a profit.

All the attention being paid to new economy stocks has somewhat diminished investor's interest in old economy companies. For at least part of the investing public, these old-time firms are strictly yesterday's news. But many of these firms have been around for decades - which means they know something about survival. Now, some of them are actually borrowing a few tricks from the new company upstarts - and it's paying off.

Here's one example: Walgreen's, the giant drugstore chain, is now positioning itself as a "multi-channel" retailer by offering prescriptions and general merchandise over the Internet. Of course, customers can still fill their prescriptions in person or over the phone, but now they also have another convenient option.

Other old economy companies are taking full advantage of new economy techniques. Major banks, mortgage bankers, utilities and phone companies are all using the latest technologies for electronic bill paying to improve their profitability. And there are many other "old-meets-new" examples out there. Furthermore, these companies aren't just using the Internet to conduct retail operations - they are also going online to expedite their business-to-business transactions. The end result? Increased efficiency and greater profit potential.

In short, the older, established firms that can use new technologies to their advantage should be able to compete - and thrive - in today's economy. In addition, these older firms have proven track records of earnings - an element that's missing from many of the cutting-edge new economy stocks.

So, when you're thinking about where to put your investment dollars, look for the best of what's" new" - and what's "old."

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.