Latest example of a poor bet

EMC is the latest proof hot stocks don’t always meet the hype

EMC was once one of the hottest tech stocks to own.

Another member of the “Four Horsemen of the Internet” has been knocked off its steed.

EMC, believe it or not, was considered one of the hottest tech stocks to own during the Internet boom of the late 1990s and early 2000. Now it’s about to be a unit of Dell. Despite all the hype during the tech bubble, EMC has been a lagging stock that, Monday, announced it’s being bought by Dell for roughly $70 billion.

The buyout of EMC closes the book on the data storage company’s 36-year run as an independent firm. But more important for investors, it’s the latest example of the dangers of chasing hot stocks when they’re hot. Whether that’s the “Nifty 50” stocks of the 1950s and 1960s, the dot-com stocks of the Internet bubble or the Four Horsemen stocks, the fallout has been the same. Investors can only wonder if the “FANG” favorites — Facebook, Apple, Netflix and Google — will meet a similar fate.

Horsemen companies EMC, network gear maker Cisco Systems, storage maker Oracle and computer systems maker Sun Microsystems prospered as the Internet was being built.

But getting blinded by a current trend, once again, prompted investors to make a poor bet. Three of the four Internet horsemen have underperformed in the Standard & Poor’s 500 since the beginning of 1999. Oracle is the only member of the horsemen that has beaten the S&P 500.

EMC is a classic example of an overhyped stock that didn’t pay off. Shares of EMC have gained only 28% since the 1999 frenzy — lagging the S&P 500, which has gained 64%. Cisco Systems, at the nucleus of the networking revolution, has seen its shares rise just 17%. Sun Microsystems doesn’t exist anymore. As the lone horseman, Oracle shares are up 432% since 1999. Note to investors: Be wary of following the herd.