Mary Meeker 2.0
With the web booming again, Morgan's star analyst is riding high.
by Andy Serwer, FORTUNE Magazine

(FORTUNE Magazine) - Has Mary Meeker at long last been redeemed? The fact that she is still Morgan Stanley's ace Internet analyst after more than a decade on the job is proof that she's a survivor. Dubbed the "Queen of the Net" by Barron's back in the day, Meeker rose to fame as one of the web's most high-profile cheerleaders--an unflagging Pollyanna even as Internet stocks went splat.

She then became one of the market's most vilified figures. Five years ago this month FORTUNE put her on the cover with the question "Can We Ever Trust Wall Street Again?" But unlike counterparts such as Blodget, Quattrone, and Grubman, she was never indicted, fined, or censured. And here she is, still at Morgan and riding high again with stock picks like Google (Research). Was she the smartest kid in class after all? Any regrets?

"Do I wish I'd downgraded stocks in 2000? Absolutely," she tells me. "But I did caution investors, and I said, 'This is a portfolio. Not all stocks will go up.' Were and bad calls? Yes! But was Google at $118 a good call? Yes!" According to Morgan, Meeker's picks have outperformed the S&P 500 in 11 of the past 13 years. (In her worst year, 2000, her return was --53%.)

Speaking to Meeker, I was immediately reminded why she climbed so high up the Wall Street food chain. She is absolutely first rate when it comes to spotting big-picture trends before they come into focus. She gathers massive amounts of data and assembles it into voluminous reports that, while sometimes rambling and overambitious, are stuffed with a million jumping-off points.

Her bailiwick is still what she calls TMT (technology/media/telecom), and she still recommends some of the same names she's been following for years, such as Yahoo (Research), Intuit (Research), and eBay (Research). In Google she sees tremendous revenue growth. Her valuation model puts the stock at around $500.

But what seems to get Meeker most juiced these days is the new beast of the East. "China is about to become the leading nation in the world in terms of using TMT products and services," she says. "China is No. 1 in mobile-phone usage and cable TV subscriptions, No. 2 in Internet users, and No. 4 in installed PCs, and growing fast." Meeker points to stocks that her colleague Richard Ji, who's based in Hong Kong, recommends, such as wireless content provider TOM Online (Research), online game site NetEase (Research), and web-based travel company Ctrip (Research).

When I point out that these stocks have doubled over the past two years and sport lofty P/Es, Meeker responds by telling me that the market value of all public Chinese Internet companies is $15 billion, while Japanese Internet companies are worth $75 billion. It's the sort of relative valuation metric that, while compelling, has an odor of late-1990s rationalizing, which makes me wary.

After we spoke, I decided to revisit the research that put Meeker on Wall Street's map. The Internet Report, which she co-authored in late 1995, was a phenomenon (it was even sold in bookstores).

In retrospect it is sometimes dead-on prescient, sometimes pie-in-the-sky. In the very first sentence Meeker lists her team's five stock picks: Cisco, Ascend, Cascade Communications, America Online, and Intuit.

How would an investor have fared if he'd bought and held those shares until today? The two networking stocks, Ascend and Cascade, both ended up as part of Lucent, which has been a money loser. Despite falling from their peaks, AOL and Cisco are still up nicely, while Intuit has matched the market.

Of course this is just one snapshot. Meeker & Co. recommended many other stocks over many time frames. But to me it says this: Mary Meeker is neither a super-seer nor a purveyor of dogs. Time has a funny way of revealing what we all know deep down about investing. Over the long haul, returns regress to the mean. Almost everyone ends up looking average. Even Mary Meeker. Now who would have ever imagined saying that? Top of page