We recently stumbled upon a speech Jim Cramer gave at the height of the tech stock market bubble (in 2000) picking his top 10 stocks. Cramer, at the time, was a noted hedge fund manager and has gone on to become a bestselling author and host of CNBC’s Mad Money. In all, a very well respected investor.
This post starts with an extract from his speech, showing just how confident investors were about these technology stocks at the height of the tech bubble. Then it lists all 10 companies he picked, and see’s how they’re doing today.
To start with, here is an extract from Cramer’s speech:
“We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over — and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don’t even have earnings per share, so we won’t have to be constrained by that methodology for quarters to come…
… We try to own every one of them. Every single one. And if I had my druthers, I wouldn’t own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe.”
So clearly he was confident about the 10 stocks he was going to list in that speech. Let’s have a look at what stocks he picked, and how they performed since:
724 Solutions (SVNX): This company developed software for mobile networks. After IPO’ing at $26 per share, the company shot up to $71 on its opening day of trading, and was the most successful IPO in Canadian history. After the company’s share price collapsed as the tech bubble burst it was acquired for just $3.34 per share in 2006.
Ariba (ARBA): This IT services and software company was founded on the idea of using the internet to make procurement easier for companies. It also had a fantastic opening day, rising 291% from $23 to $90, giving the company a $6 billion value. During the tech boom the company reached a market cap (total market value) of $40 billion. This company actually survived the tech crash, although never reached previous valuations and was bought out by SAP in 2011 for $4.3 billion (just 10% of its peak value).
Digital Island (ISLD): After an IPO price of $10 per share, Digital Island’s shares traded as high as $148 in December 1999, however after the tech crash was purchased by British telecom Cable & Wireless for just $3.40 a share.
Exodus (EXDS): After floating at $15 per share, Exodus at its peak traded at $80 per share and had a $37 billion valuation in 2000. As the company collapsed in 2001, the CEO was panic selling her shares at around $9 per share. The share price settled under $2 as the company declared bankruptcy in September 2001, and was purchased by Cable & Wireless for $800 million in November 2001.
InfoSpace.com (INSP): InfoSpace.com provided a variety of web-based services including phone directories, weather information, stock quotes & search directories. The company still exists today, although rebranded as Blucora in 2012. At its peak in 2000, InfoSpace had a market value of $31 billion. and the stock price was over $1300 per share. However by June 2002 it was trading at just $2.67.
Inktomi (INKT): A search engine company, later replaced by Google and Yahoo, Inktomi’s share price peaked In March 2000 at $241 per share. In March 2003, the company was sold to Yahoo! for $1.63 per share.
Mercury Interactive (MERQ): This software company traded at close to $100 per share in January 2001. However, by the end of the year was trading just above $20 per share. Despite this it continued to operate into the 2000’s before being delisted from the NASDAQ in January 2006 for failing to comply with the stock exchange’s rules. In July 2006 HP purchased Mercury for $52 per share.
Sonera (SNRA): Once Finland’s largest telecom, in 2000 the company’s shares were trading around 80 Euros. It was purchased by Telia Company in 2002 for 5 Euros per share.
VeriSign (VRSN): As one of Cramer’s better picks in 2000, VeriSign still is operating today trading at around $125 USD when this post was written. Looking back over the company’s price chart the company is still well down from its peak in 2000 (even 18 years later!) The stock peaked at $248.50 in March 2000.
Veritas Software (VRTS): Veritas was one of the largest tech companies during the dot com bubble years and in 2000 had a market cap of $55 billion. However, by 2005, the company was well off its previous high and was purchased by Symantec for $13.5 billion.
As you can see Kramer’s confidence about these companies didn’t match his results. So next time you hear an expert guaranteeing something will happen in the stock market or you read an article naming a stock ‘the next big thing’ remember this example. Jim Kramer was wrong about all 10 stocks he listed. If he had held them into 2001 and beyond, he would’ve lost most of the money he was managing.
See Kramer’s full speech here: https://www.thestreet.com/story/891820/1/the-winners-of-the-new-world.html
This speech was originally featured in Equity Mates Thought Starters #22
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