Have you wondered why the NASDAQ has become so popular? It is now the driving force leading markets higher. Here are some highlights from the pages of the NASDAQ:
The NASDAQ was founded in 1971 by the National Association of Securities Dealers (NASD) as the first electronic market. At first it was just a “bid” and “ask” quotation service. It was simply called the Over The Counter Market (OTC) It wasn’t until 1987 the label NASDAQ was used. In 1985 the NASDAQ 100 became its first index. The market crash of 1987 wrecked havoc on the NASDAQ. Some brokers simply did not answer their phones. This lead to the creation of the Small Order Execution System (SOES). It requires that NASDAQ market makers must honor all trades.
The Dot.Com Bubble.
When the markets exploded to the upside in the late 90s, the NASDAQ led the way. In 1990-2000 there were 630 IPOs, most of them in technology. If you had an idea to make widgets that would make you a multi-millionaire, you just simply went public. No matter if you had no equipment, no business plan, no marketing strategy, no sales force, you were in business. We all know what happened. Like every bubble, investors saw that these companies had no real future and would not invest in them. That caused the Dot.Com crash of 2000. At the height of the bubble the NASDAQ closed at 5,048.62. By October 10, 2002 it plunged to 1,108.49 on an intra day basis, wiping away fortunes from many investors.
Slowly the market recovered and held its low during the 2008-09 crash, reaching 1,265.52 on an intra day basis. The survivors prospered and grew into the powerhouses we know today like Cisco, Microsoft and Oracle. However, they have become so big that growth going forward is somewhat limited. That has left the door open for a new breed of IPOs in pharmaceuticals, software development and social media. We‘ve seen Apple grow into the largest company in the world. It gained 68% in just 12 months. In 2000, Apple comprised only .2% of the NASDAQ index. Today it captures 10% of the index. We‘ve seen Google, Facebook and Tesla take the lead also.
The frenzy of the DotCom era has subsided with only 299 new IPOs in 2014. 43% of these were in technology. This past week we saw two new pharmaceutical offerings;
Check Cap LTD (CHEKU) is an Israeli company that has developed a pill taken orally that produces an MRI like image of a person’s intestines. The image is seen on a screen for doctors to analyze the formation of polyps in the intestines. The pill can be taken at any time without diet and passes through the body. If polyps are found further tests then can be performed. The company has 9,851,866 shares outstanding and was priced around $6.00.
INOTEK Pharmaceuticals Corp (ITEK). It has a capsule that controls the Trabecular Meshwork or TM. The TM controls the Intraocular Pressure (IOP) that is the amount of fluid that the eye releases, It is in Phase 2 of clinical trials with the FDA. There are 15,877,490 shares outstanding and was priced at $6.00..
For investors the NASDAQ has 2,975 listings as of January 2015 with a market value of $8.5 trillion. The NASDAQ Composite closed at 4,955.97 on February 20, 2015. The NASDAQ 100 closed at 4,443.05 on the same date. The Composite index is only 92.65 points away from reaching its all time DotCom high.
Investors have been flocking to the NASDAQ because, in most cases, you are dealing with a domestic company that is not subject to the fluctuations of the large multi-nationals. They are getting battered from the rapid fire of international events. You are also buying smaller companies with greater percentages of growth potential.