Yesterday, the Nasdaq topped 4,000 for the first time in 13 years (but slipped back and closed at 3,995). The composite remains more than 20 percent below the highs that its dot-com high-fliers pushed it to in March 2000.
What is different between now and the last time the Nazz was here? Valuations, for starters. The big tech leaders in 2000 had nosebleed valuations, assuming they had any earnings at all. Today, the leaders have mostly mid-teen valuations. Looking at the forward earnings, we see Apple with a price-to-earnings ratio of 12.2, Microsoft at 14.1, Cisco at 10.6, Intel at 12.8 and Qualcomm at 14.4.
There are still some stocks with absurd valuations. The poster child is Amazon, which arguably has no earnings, or if we accept the company's tortured accounting, is at a p/e of 467.4. Google seems almost reasonable at 23.9 p/e, but at least it has growth prospects that somewhat justify that ratio.
Beyond valuations, there are other differences. As Matt Krantz of USA Today points out, the "10 most valuable stocks in the Nasdaq in 2000 accounted for 40% of the Nasdaq composite value." Today, the top 10 only accounts for 32 percent. It is a somewhat less concentrated index than it was at its dot-com peak. Krantz also notes that technology companies make up 42 percent of the Nasdaq composite, down from 51 percent in March 2000.
Even the Nasdaq 100 (QQQ) is diversifying. Just as the exchange spent much of the past decade trying to broaden itself by attracting non-tech companies, so too has the index. Make no mistake, it is still 54 percent technology firms, according to Morningstar. But nowadays, the Qs also has a broader weighting of consumer cyclicals (17 percent), health care (13.5 percent), communication services (6.3 percent) and industrials (3.7 percent).
Don't look for financial services, energy, utilities or real estate in the Nasdaq 100 -- they are not represented. But they do show up more on the Nasdaq composite exchange than they once did.
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Barry L Ritholtz at firstname.lastname@example.org