(August 8) – “Henry Blodget’s words used to add rocket fuel to the new economy. Yesterday, Mr. Blodget, Merrill Lynch’s star Internet analyst, re-entered the atmosphere, downgrading 10 of the 29 companies he recommends,” reports Danny Hakim in today’s New York Times.

” ‘We are resetting the investment ratings for our Internet universe,’ Mr. Blodget wrote in a report. Four months after the start of the April bloodbath that halted the Internet’s unfettered charge, one of the most reliable of Internet bulls is finally showing signs of doubt.”

“Mr. Blodget, 34, is considered one of the Internet sector’s two premier analysts, along with Mary Meeker of Morgan Stanley Dean Witter. Last month, Ms. Meeker showed a speck of caution when she raised her loss-per-share estimates for Amazon.com, but she stopped short of a downgrade. Mr. Blodget has countered with a raft of downgrades, but yesterday they barely registered across the sector.”

“TheStreet.com Internet index gained 4.07 percent, and several names Mr. Blodget downgraded surged forward. Why? Maybe because of how far they have already fallen. The analyst, who once led the market up, now appears to be following it down.”

“This has not been a banner year for Mr. Blodget, even by the recent anemic standards of Internet investors. Of the 29 stocks he covers, 11 of the companies are new to the group this year. The other 18 stocks, which he has covered all year, are down an average of 54.2 percent in 2000.”

“TheStreet.com Internet index is down 33.8 percent over the same period. Since April, Internet mutual funds have been entrenched as the worst performing among all domestic fund categories.”

“Comparing an analyst’s picks to a mutual fund has its flaws, but it can be useful for a rough picture.”

“Mr. Blodget’s average return ranks behind even the worst-performing domestic mutual fund, Jacob Internet, down 51.4 percent.”

“Only one of his 18 picks, Inktomi, has gained this year. Six have lost more than 70 percent of their value. EToys has lost 84.3 percent. ‘The market is no longer giving some companies the benefit of the doubt,’ said Mr. Blodget in an interview. ‘We’re acknowledging that. The sector is so volatile that it’s made some of the ratings meaningless.’ “