NASDAQ 5,000: Let’s Try This One Again

We are not quite there yet, but we are getting close. The NASDAQ index, often considered a proxy for technology stocks, closed above 4,950 last week, the highest it has been since the tech bust began in March 2000. Seems like yesterday, but my goodness, that was almost 15 years ago.

I remember it very well. Our little company was less than six months old in March 2000, when the NASDAQ first hit 5,000 and peaked at more than 5,100 before falling off a cliff.1 Busy month.

Back then, you may recall the absurd valuations of companies large and small. Cisco was valued at more than 100 times earnings. Tiny, money-losing companies went public and were valued at billions of dollars.

Being based in Silicon Valley, we watched the frenzy and subsequent collapse up close.

Beautiful, new office buildings were built, filled and then emptied, seemingly overnight.
A lot of companies simply disappeared. The “real” companies, like Intel, Cisco and Microsoft, all survived, but stock prices returned to normal.

This time, the public companies included in the index have real earnings and their valuations are fairly reasonable. And another change from 2000 — this time, the biggest NASDAQ name is Apple. If you didn’t think the year 2000 was a long time ago, remember that it came before the iPad, the iPhone and the resurgence of Apple, which has now become the largest company in the U.S.2

The New Thing: Stay Private

Oddly enough, the new frenzy in highly valued, new companies is taking place in private markets, where companies like Uber are sporting $40 billion valuations, while still raising private-equity capital and remaining private.

In 2000, the saying was, “If you can fog a mirror, you can go public”. Now, these companies do not seem to be in a hurry for the IPO. After all, there is a ton of money in private equity and hedge funds, as this CNBC article notes. Plus, the club of private companies worth more than $1 billion is getting pretty crowded.

Perhaps this is where a frenzy belongs, if that is what this becomes:
Private, high-risk money chasing the latest, high-growth ideas, instead of rushing new companies into public markets and broad-equity indices before they are ready for prime time.

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Roger Hewins
Roger Hewins

President

Roger Hewins is the President of Hewins Financial Advisors, based in North Palm Beach, FL. Roger has more than 30 years of experience in investment management, helping bring the sophisticated financial advice typically reserved for large institutional clients to everyday investors, from high-net-worth individuals and families to small businesses and retirement plans.

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NASDAQ 5,000: Let’s Try This One Again

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