Nasdaq Dive Pushes Top Analyst Off Mark

He’s getting a lot of clicks, but lately he hasn’t been clicking.

Henry Blodget, who covers Web stocks for Merrill Lynch & Co., was the most-read analyst online during the first quarter among the 37,000 whose research is available on First Call/Thomson Financial’s data site. And in the latest annual survey published by Institutional Investor magazine, he ranked No. 3 among Internet and “new-media” analysts.

But amid Nasdaq’s swoon, his recent performance looks shaky: Three-quarters of the companies Blodget rates “buy” or “accumulate” are down for the year. EToys Inc. (ticker symbol: ETYS), Blodget’s hardest-hit pick of late, is typical of many online retailers whose shares have tumbled because of the perception of growing competition. The Santa Monica-based toy seller has sunk 76% this year, to $6.34.

But investors say they don’t necessarily read Blodget for his recommendations. Instead, they turn to his reports for company and industry insights.

“The Internet is like a lightning-fast train, and Blodget’s at the forefront of the thinking about it,” said Joseph Besecker, president of Emerald Asset Management in Lancaster, Pa.

Investors note that Blodget hasn’t downplayed the tech sector’s risks. A week before the Nasdaq composite index began its recent slide, Blodget said 75% of Internet companies--including some he covers--will fail or be acquired by competitors within five years.

“Expect to see a significant shakedown,” he said.

For those who still believe in Blodget’s stock-picking, he has “near-term buy” ratings on several Net stocks, including EBay Inc. (EBAY), Yahoo Inc. (YHOO) and Homestore.com Inc. (HOMS) and a “long-term buy” rating on just one: MyPoints.com Inc. (MYPT), the San Francisco-based direct marketing firm.