The Nasdaq Composite is up 35 percent this year, but while other major indexes like the Dow Jones industrial average and Standard & Poor's 500 have celebrated all-time highs again and again, the Nasdaq remains 20 percent below its dot-com peak of 5,048.62.
That's a good thing because the biggest beneficiary of the late 90s internet mania was also its biggest victim. After cresting on March 10, 2000, the index lost nearly 80 percent of its value over the next two years, touching bottom on Oct. 9, 2002 at 1,114.11. The Dow fell 27 percent over the same period, and the S&P 500 dropped 44 percent.
Even as it soars faster than other indexes, the Nasdaq isn't what it was. While still tech-heavy, it's more diverse, reasonably valued and loaded with profitable companies, investors say.
"The Nasdaq is very different, in every measureable, quantifiable way, than it was," says Gavin Baker, who manages nearly $10 billion in assets for the Fidelity OTC fund.
Technology companies make up a smaller percentage of the index, roughly 42 percent, compared with 56 percent 13 years ago. The telecom industry is a little less than 2 percent, compared with 18 percent back then. And consumer-focused companies such as Amazon.com are a much bigger part of the index, making up 22 percent, compared with basically zero in March 2000.
The Nasdaq recently passed the 4,000 mark, a level last seen in September of 2000. But that doesn't mean its stocks are back in a dot-com-like bubble. Yes, it's still riskier than the Dow and S&P 500, investors say, because it contains hundreds of small companies and is heavily exposed to technology. But it is significantly less risky than it was.
When the bubble was at its biggest, the index had a price-to-earnings ratio of 194:1, which means investors were paying $194 for every $1 of earnings the companies in the index brought in. Today, the Nasdaq's P/E is around 23.5, according to FactSet.
What was powering its lofty valuation in the go-go years? It was companies like Pets.com and Webvan, which were never profitable and which investors valued based on "cash burn rates" and "eyeballs," instead of sales and profits. Now, Pets.com and Webvan, and those metrics, are dead and buried.
While Nasdaq's current rise can be partly credited to technology companies, these "new" tech names are much different from the ones that went public in the late 1990s.
Google, a Nasdaq company, debuted in 2004 when it was already profitable. Facebook, one of the index's largest companies, has enjoyed solid profits and strong revenue growth. And Apple, which has been a public company on the Nasdaq since the early 1980s, has seen mammoth growth. In March 2000, Apple was a $20 billion company that hadn't released the iPod. Today, it's worth $500 billion.
"These are profitable companies with mature business models and cash flow," Baker says.
Even some of the dot-com era's biggest busts on the Nasdaq have recovered.
Priceline.com hit $975 a share in 1999, only to plunge to less than $10 three years later. It now trades at $1,189.
Still, it may take a while for the Nasdaq to remove all the scar tissue from the dot-com collapse. The stock market is unlikely to keep rising at its scorching 2013 pace, so the Nasdaq is two years away, maybe more, from erasing all its internet bubble losses.
And there are some big Nasdaq stocks that never truly recovered. Intel and Microsoft haven't seen much growth for a decade - and that's not expected to change. Worldwide PC sales are forecast to fall 10 percent in 2013 to 184 million units, according to industry tracking company IDC. While Microsoft and Intel have diversified into other businesses, selling Windows software and computers remains Microsoft's bread-and-butter.
Intel traded for roughly $72 a share at its height. It's now $25. Microsoft had its dot-com peak at $58. It's down to $38.
"The so-called 'four horseman' of technology - Dell, Microsoft, Cisco and Intel - are not going to be the ones to take us to 5,000," says Dan Morgan, a portfolio manager with Synovis Trust, who specializes is technology companies.
So what will drive the Nasdaq to 5,000 if the old guard can't?
Morgan expects the high-flyers of the last five years - Google, Apple and Facebook - to continue pushing up the Nasdaq, which has even farther to go if it wants to reach its inflation adjusted peak of 6,845.83.
Biotechnology will also play a role, as health care now makes up 12 percent of the index's weight.
Gilead Sciences, maker of widely used flu vaccine Tamiflu and HIV medication Truvada, is now the 8th largest company in the Nasdaq and is up more than 3,100 percent since the index's all-time high in March 2000. Pharmaceutical company Amgen is the 12th largest company in the index.
"I'm optimistic we will eventually make a new high," Baker says, "but it's going to take time."