As an investor in the stock market, I’ve found myself way out of the money in some stocks, only to hang on, and luckily come back to realize gains. Of course, on some stocks, the opposite has happened, with me not selling to lock in gains, only to see those paper gains evaporate into the stratosphere.
And speaking of the stratetosphere, that is exactly where the Nasdaq was in March 2000, at 5,000. While the S&P, DJIA and major stock indices are back up to their all time peaks, the Nasdaq remains 50% off, notes this article off Marketwatch.
It’s an interesting observation, and rightfully, some analysts are quick to point out that if anyone is holding their breath for the Nasdaq to hit 5,000 again as a sign that the high-tech laden index has made a comeback, they’re due for a major disappointment:
While many used to find justifications for the tech mania of the 1990s, most analysts now agree that the Nasdaq highs reached back then had very little to do with reality.
“Those Nasdaq highs were so speculative, so far from reality, that it becomes difficult to compare them with those of the S&P and with the Dow,” said Barry Ritholtz, chief investment officer at Ritholtz Capital Partners.
Since 2002, the Nasdaq has been a favored destination of investors looking for a bigger bank for their buck.
Since the October 2002 lows, the Dow has gained back around 85%, the S&P has gained 97%, while the Nasdaq has rallied a whopping 133%.
But, that is nice and dandy, the market is way off from that magical 5,000 mark, and frankly, I’m just not sure if anything will drive it back to those lofty levels.
It should be noted that one major reason we saw such lofty levels back in 2000 was that the bubble was one inflated by public shareholders, not private. Sure, when we see YouTube bought for $1.65B, we tend to gasp. But YouTube was an IPO-candidate that was taken off that course by Google, who itself used stock to buy a company that would invariably be a competitor. Those who benefited from the capital gain were VCs, founders and employees; and not investors in public stock.
In the same vein, when Google shelled out $3.1B for Doubleclick, it was buying a privately held company, so the private bankers Hellman & Friedman walked away with the tripling of their investment.
This is interesting, because yesterday Mediapost asked if Facebook’s ship had past. Perhaps. The market is crazy, but it’s fickle more than it’s buoyant. I wrote that in light of some of the deals and multiples, Facebook could command $5B and more, Peter Thiel himself said $8B and this was before AQNT sold to MSFT for $6B and DCLK fetched $3.1B from Google. These two deals were, in fact, for 15 and 10 times revenues… and the Mediapost article suggested that social networks had been passed by ad networks as the target du jour in 2007.
I have been saying that Facebook is a more likely IPO candidate, with its $150M in projected revenues for 2007, its booming growth rates, and its new forays in classifieds etc.
Perhaps. But if the public markets - Nasdaq in particular - are to ever get anywhere near 5,000 again, they will need more IPOs and more high-growth stocks like Facebook.
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