Tuesday, February 24, 2015

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a "stage four" decline back to its pre-bubble base. In fact, it sank to levels far below that base. Today, Infospace, having re-branded itself as Blucora (BCOR), trades at a 99% discount to its dot-com bubble peak.   

Are there other boom-and-bust candidates that might claim the title of "quintessential Nasdaq bubble stock"? Sure, and if we pool our heads together and think about it for a few moments, I'm sure we can think of a couple. We'll examine some tech survivors, and tech wrecks, in a follow-up post as we hone in on Nasdaq 5,000 for the first time in 15 years.