Tuesday, March 24, 2015

Biotech today vs. Internet in '90s bubble

Biotechnology stocks are nowhere near keeping pace in the current U.S. bull market with the surge in computer-related shares that distinguished the Internet bubble years of the 1990s.

Comparison of the monthly performance of the Nasdaq Stock Market’s biotechnology and computer indexes, made up entirely of companies which have Nasdaq listings. The biotech index climbed almost sixfold from March 2009, when the bull market started, through yesterday.

“The rate at which they accelerated is peanuts compared to the tech stocks,” Michael Batnick, director of research at Ritholtz Wealth Management LLC, wrote yesterday in a blog posting with a similar chart.

Between July 1994 and March 2000, the Nasdaq’s computer gauge increased more than 13-fold. The chart displays the surge along with the indicator’s 32 percent plunge in the first two months after the period ended.

“It is impossible to escape the biotech bubble talk,” Batnick wrote on his Irrelevant Investor blog. Yet the group’s gains are less than extreme when its industry gauge is compared with the Nasdaq Composite Index during the Internet bubble, the New York-based analyst wrote.

Six-month percentage changes provide a useful comparison, the posting said. From January 2012 to last month, the group’s Nasdaq index rose more than 30 percent twice. For a comparable period ending in March 2000, the Nasdaq Composite exceeded the threshold nine times.

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