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This isn't your father's Nasdaq

Matt Krantz
USA TODAY
Jay Heller, IPO Execution Officer for Nasdaq,  monitors the progress of pricing for Inovalon's IPO at the Nasdaq MarketSite, Thursday, Feb. 12, 2015 in New York. (AP Photo/Mark Lennihan) ORG XMIT: OTKNYML106

The only thing that's the same is the number: 5000.

It's been 15 long years since the Nasdaq composite index hit its Internet-stock-fueled 5000 zenith. It's been a slow climb back - one charged mostly by companies that most investors wouldn't have given even a second thought when they were chasing the trendiest dot-coms. Many of the big winners that pushed the Nasdaq back to 5000 weren't even stocks in March 2000.

Getting back to even - even with the radical change in leadership among the dominant technology companies - gives long-suffering investors a tangible reason to think the dot-com bust is finally a thing of the past.

"It's very psychological with most retail investors," says Jeffrey Carbone, of Cornerstone Financial Partners. "It should continue to increase confidence."

The Nasdaq composite's long march back is a textbook example of creative destruction in markets: basically, as old companies and their ideas fail, companies with new ideas and products emerge and catch the attention of investors, and money flows into an entirely new generation of stocks. Examples of the dramatic changes since 2000 include:

* Fast rise of big new ideas. When investors get overly enthusiastic about a sector - like they did with the Internet in 2000 - they can miss out on big ideas bubbling up elsewhere. Monster Beverage is the best performing stock in the current Nasdaq 100 - by far - thanks to the surging popularity of energy drinks. Shares of the company are up roughly 46,000% since March 2000 - as the company boosted earnings and revenue while tech stocks and companies were imploding. The number 2 best Nasdaq 100 stock is Keurig Green Mountain - which popularized the single-cup coffee trend. Shares of that company are up more than 31,000% since March 2000. Beverages might not be as alluring at Internet - but these companies were the places to be. Compare these gains with Cisco Systems, the "must-have" giant tech stock of the boom. Its rstock is down 56%.

* Increased role of medical and biotech. Biotech stocks suffered a bit of their own bubble after the dot-com crash. But the companies generating genuine life-saving and extending technology have been huge winners. Gilead Sciences has seen its shares soar more than 4,500%. That's what you'd expect from a company that has created breakthrough treatments for everything from hepatitis to liver disease. And the Nasdaq itself reflects the change in the role of different industries. Back on March 10, 2000, technology stocks accounted for 65% of the Nasdaq 100, says Nasdaq. Today, that's down to 43% as consumer services account for 21% and 16% for health care.

* New domination. Back in 2000, the Nasdaq was dominated by the big four techs: Microsoft at $525 billion, Cisco at $455.4 billion, Intel at 401.3 billion and database maker Oracle at $232.4 billion. Those four companies accounted for more than $1.6 trillion in shareholder value. But how things have changed. Today, Apple which was nowhere in sight in 2000 is No. 1 at a value pushing close to $800 billion alone. Microsoft is still in the game at No. 2. But two stocks that weren't even public in 2000 - Google and Facebook - are now in the top five. The hundreds of dot-coms investors were so excited about in 2000 have largely faded away. Only a handful of the stocks that were in the USA TODAY Internet 100 index still exist - and many that do are small units of larger traditional companies. The big exception is retailer Amazon.com, which is still the fourth most important stock in the Nasdaq 100.

So yes, the Nasdaq is back to 5000. But the way it got here has nothing to do with why people were piling into tech stocks in 2000 when the bubble burst. "The Nasdaq is more diverse now than it was in 2000," says Ryan Jacob, portfolio manager of the Jacob Internet Fund, one of the earliest to focus on the Internet.

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