Nasdaq climbs out of hole, 12 years after bust
NEW YORK — The Nasdaq Composite Index needed 31 months to plunge 78 per cent after the Internet bubble burst in 2000. Climbing out of the hole took more than 12 years.
Led by a 132-fold increase in Apple Inc. and a 13-fold jump in Google Inc., stocks in the gauge on Thursday cleared the record 5,048 threshold that taunted investors for 15 years as a symbol of dot-com excess. The Nasdaq has advanced more than 350 per cent since bottoming in October 2002.
The Nasdaq rose 20.89 points, or 0.4 per cent, to 5,056.06. In many ways, the crossing of that threshold is purely ceremonial and psychological.
Six years into a rally that began at the depths of another crisis, money managers say technology stocks are safer now than they were a decade and a half ago. The biggest difference is valuation. While the Nasdaq 100 Index trades for about 24 times full-year earnings today, too few of its members had profits even to calculate a ratio in 2000.
“That was a totally different environment,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $338 billion. “We had sentiment that was through the roof and we thought we had reached the new era and forever more, it’d be different. You were valuing companies on clicks not on earnings, and I don’t sense any environment close to that today.”
Partly to the ascent of Apple and Google and partly to a reluctance to take money-losing startups public, technology profits are sounder. Information technology firms earned $194 billion in 2014, about 19 per cent of the S&P 500, compared with $67 billion in 2000, or 13 per cent.
The list of Nasdaq 100 companies then and now highlights changes that have swept through the landscape. While the three largest weightings of March 2000 — Microsoft Corp., Cisco Systems Inc., and Intel Corp. — remain in the top 10 today, Apple, now the world’s most valuable company, didn’t even make the top 30. Today’s No. 3, Google, was four years from going public, and No. 4, Facebook Inc., didn’t exist then.