The last time the Nasdaq composite stock index crossed 5000 – in March 2000 – it was powered by big companies that make software and hardware for PCs, and red-hot Internet companies with no earnings.
What might push the Nasdaq over 5000 this time? Greece. And red-hot Internet companies with earnings. News of a pending settlement between Greece and its creditors sent all stocks soaring Friday, taking the tech-laden Nasdaq with it. But real companies with solid earnings have made much of the dot-com dream real – 15 years after the bubble burst.
Consider Apple. The company’s iPods popularized legal music delivery via the Internet. Its iPhone pioneered mobile Internet. In 2000, Apple wasn’t among the 10 largest Nasdaq stocks. Today, it’s the largest stock by market value in the U.S., worth $754 billion, paying dividends just like stodgy industrial stocks. In fact, technology stocks now pay out more in dividends than any other stock sector.
Google, the third-largest stock on the Nasdaq, wasn’t traded in 2000. Neither was Facebook, now the fourth-largest Nasdaq stock. Or Amazon, now in fifth place in the index. All have risen because of the power of the Internet – something the dot-com bubble investors foresaw, but paid far too much for.
The Nasdaq has risen at a much more stately pace than it did in the 12 months leading up to the dot-com crash. The index has gained 15% the past 12 months, vs 110% in the blistering 12 months before the bubble burst in March 2000.
Cisco Systems was the biggest stock in the Nasdaq in the dot-com era. It had ripped to a 161% gain in 12 months before the tech wreck began. But the real stars were the Internet stocks. E-commerce software and Web developer BroadVision blasted up 592% the second half of 1999. InfoSpace (now Blucora) leaped 355%. Pets.com, an online pet-supply company, raised $82.5 million in February 2000. It filed for bankruptcy protection in November 2000.
And it all came tumbling down as the nation entered a recession and, suddenly, no one wanted companies with no earnings. By the time the tech wreckage settled, the Nasdaq composite was down 78%, dozens of unprofitable companies had vanished – and the stage was set for a protracted and (somewhat) more sober march back to Nasdaq 5000.
Fifteen years later with the Nasdaq composite opening the week at 4956 following an eight session winning streak, 5000 is just one decent rally away.