The New Millennium
The new millennium was marked by the emergence of a group of Internet-based companies collectively known as the “dot.coms.” Companies saw their stock prices shoot up if they simply added an “e-” prefix to their names or a “.com” to the end. A bubble emerged, fueled by rapidly increasing stock prices, market belief in future profitability, individual speculation in stocks, and widely available venture capital.
During the bubble, many investors proved themselves willing to overlook traditional performance metrics such as P/E ratio in favor of confidence in technological advances. Unfortunately, the dot.com boom was about as stable as a house of cards. The bubble began to pop in 2000, and the party was over pretty much by the end of 2001. Some companies, like Pets.com, failed. Others gave up much of their market capitalization. Cisco stock, for example, declined 86 percent, though the company remained stable and profitable. Read More