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Even amid rebound, tech-stock index still at half its peak

10 years after the tech bubble

The Denver Post

By Aldo Svaldi
March 10, 2010

Investment adviser Kenneth James still remembers clients who called in 2000 asking him to get them in on the "lottery-style" gains their neighbors and friends boasted about.

"My strongest recollection was the nagging thought of 'Why am I not participating in this?' " said James, with Greenwood Investment Management in Centennial.

Then, he worried about losing clients. A full decade later, he is glad he didn't drink the Kool-Aid.

The Nasdaq composite index peaked at 5,048.62 on March 10, 2000, taking several Colorado companies along for the wild ride. On Tuesday, the index closed at 2,340.68, still 53.6 percent below that high mark.

In 2000, 32 public companies in Colorado traded at a market value of $1 billion or more. Measured at their peak values, those Colorado companies, some of which traded on exchanges other than the Nasdaq, had a combined value of $369.3 billion.

As of Friday, there were 30 Colorado public companies with a market value of $1 billion or more. But as a group, they had a combined market value of $161.4 billion.

Two companies account for the lion's share of that gap.

In 2000, Qwest Communications, laying fiber-optic strands across the country, crested above a remarkable $100 billion in market value. Qwest is now worth about $8.2 billion. Another broadband play, Level 3 Communications, once valued at nearly $50 billion, is worth $2.6 billion.

Shrinking club

At least they survived. Half of the 32 companies in 2000 on the $1 billion-plus list, which should have reflected some expectation of durability, aren't around anymore as independent companies.

Most went bankrupt, got delisted or fell to valuations so low that stronger players took them out.

Investors in 2000 thought Rhythms Netconnections was worth $4 billion. By the summer of 2001, the DSL provider was in a bankruptcy liquidation.

Other highly touted flameouts of that era include New Era of Networks, ICG Communications, McData, Tanning Technologies and FirstWorld Communications.

About the only Colorado stock considered golden back then that was able to hold a high valuation is Liberty Media, a media and entertainment holding company with interests in QVC, Ticketmaster and DirecTV.

Investors would have fared much better buying out-of-favor natural-resource stocks such as Newmont Mining, which has increased fivefold in market value over the past decade.

Stock markets are volatile because human nature is volatile, but people do learn, said John Claxton, a vice president of investments at RBC Wealth Management in Denver.

"Nobody asks for stock tips anymore," he said. "It is rare we worry about the next hot stock."

Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com