With new composure, Nasdaq marches toward its dot-com peak
NEW YORK — It takes a long time to recover from a bad hangover, especially when you party like it's 1999.
The Nasdaq Composite is up 35 percent this year, but while other major indexes like the Dow Jones industrial average and Standard & Poor's 500 have celebrated all-time highs again and again, the Nasdaq remains 20 percent below its dot-com peak of 5,048.62.
That's a good thing because the biggest beneficiary of the late '90s Internet mania was also its biggest victim. After cresting on March 10, 2000, the index lost nearly 80 percent of its value over the next two years, touching bottom on Oct. 9, 2002, at 1,114.11. The Dow fell 27 percent over the same period, and the S&P 500 dropped 44 percent.
Even as it soars faster than other indexes, the Nasdaq isn't what it was. While still tech-heavy, it's more diverse, reasonably valued and loaded with profitable companies, investors say.
“The Nasdaq is very different, in every measureable, quantifiable way, than it was,” said Gavin Baker, who manages nearly $10 billion in assets for the Fidelity OTC fund.
Technology companies make up a smaller percentage of the index, about 42 percent, compared with 56 percent 13 years ago. And consumer-focused companies such as Amazon.com are a much bigger part of the index, making up 22 percent, compared with basically zero in March 2000.
The Nasdaq recently passed the 4,000 mark, a level last seen in September 2000. But that doesn't mean its stocks are back in a dot-com-like bubble. Yes, it's still riskier than the Dow and S&P 500, investors say, because it contains hundreds of small companies and is heavily exposed to technology. But it is significantly less risky than it was.
When the bubble was at its biggest, the index had a price-to-earnings ratio of 194:1. Today, the Nasdaq's P/E is about 23.5, according to FactSet.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Consumer spending dips 0.1% in July as auto sales pull back
- Young adults drive home rental trend in Western Pennsylvania
- S&P races to August milestone
- Government approves compromise on Corbett’s alternative Medicaid plan
- Banks Gas Services finds success in jobs outside shale industry
- UPMC to help China build private medical center to boost public care there
- 2 top technology officers leave UPMC
- Auto market booming, but longer loan terms cause concern
- Twitch.tv online network reveals value of video gaming market
- Cadillac SRX to be assembled in Tennessee
- JPMorgan boosts defenses against mounting cyberattacks