After Nasdaq's Decline, Investors Tally Losses: Taking Stock
2001-03-08 13:05 (New York)
After Nasdaq's Decline, Investors Tally Losses: Taking Stock
(One of a series of stories assessing the declines in global
stock markets over the last 12 months.)
New York, March 8 (Bloomberg) -- Craig Ellis is rebuilding
his home and -- he hopes -- his career.
Ellis early last year leased offices on New York's Madison
Avenue and started a hedge fund, looking to capitalize on the 167
percent return of his Orbitex Info-Tech & Communications Fund in
1999.
The slide in the stocks that had made him famous quickly
dashed his hopes. A year after the Nasdaq Composite Index peaked,
Ellis's fund has closed, and he spends his time renovating his
eight-room, 4,200-square-foot waterfront house in Southampton, New
York, waiting for the phone to ring with a job offer.
``I got caught in my own stew,'' said Ellis, who lost
$700,000 of his own money in his hedge fund.
That kind of pain has been widespread: The Nasdaq index, a
proxy for computer and telecommunications shares, has plunged 56
percent from its March 10, 2000, record of 5048.62. The index,
which dropped as a U.S. economic slowdown crimped demand for
computers, software and communications equipment, had almost
quadrupled in the previous three years.
Intel Corp., the No. 1 maker of semiconductors, has declined
by 45 percent since the Nasdaq's peak, knocking $180 billion from
its market value, while Cisco Systems Inc., the world's largest
maker of networking equipment, has slumped 65 percent, erasing
$300 billion in wealth. No. 1 database-software maker Oracle Corp.
has fallen 54 percent, slashing $126 billion from its market
value.
Declines
Online bookseller Amazon.com Inc. has lost 82 percent of its
value in the past year; Priceline.com Inc., an online seller of
travel services, and CMGI Inc., an investor in Internet startups,
both have plunged 97 percent.
Amazon.com's chief Jeff Bezos saw his paper wealth drop by
$6.4 billion. Oracle Chairman Larry Ellison has lost $30.6 billion
since the market peaked.
Executives who had bolted from established companies to join
younger, faster-growing dot-coms were jolted back to reality.
Heidi Miller, chief financial officer of Citigroup Inc.,
joined Priceline.com in February 2000 and left nine months later
after her new company's stock plunged 88 percent.
Joseph Galli left Black & Decker Corp. in April 1999 and
spent 18 months at money-losing Internet companies Amazon.com and
VerticalNet Inc., which manages Web sites where companies can buy
and sell goods and services. Galli returned to manufacturing in
January, when Newell Rubbermaid Inc., maker of Pyrex containers
and Levolor blinds, named him chief executive.
George Shaheen left his post as chief executive at what was
then Andersen Consulting to run online grocer Webvan Group Inc. in
September 1999. He got stock and options that were worth close to
$100 million when Webvan completed its initial stock sale in
November of that year. The stock has sagged 99 percent since.
`Mule Kick'
The decline also humbled the analysts and market strategists
who routinely hyped technology shares.
Jeffrey Applegate, Lehman Brothers Inc.'s chief strategist,
recommended at the market's peak that technology stocks should
make up more than half an investor's stock holdings, compared with
a 34 percent weighting for computer-related companies in the
Standard & Poor's 500 Index.
On Nov. 20, Applegate wrote a ``Mea Culpa'' report to
clients. Applegate finally saw the light when analysts covering
technology and Internet companies began cutting their earnings
estimates. ``They did so in a swift and synchronized manner,''
Applegate said in an interview this week. ``We missed it. It felt
like a mule kick.''
Brokers weren't the only people in the investment business to
misjudge the market.
Life insurer Nationwide Financial Services Inc. set out in
1999 to build a money-management business that would specialize in
the fast-growing technology stocks.
Nationwide's Villanova Capital unit, based in Conshohocken,
Pennsylvania, last March fired the manager of its Nationwide
Growth Fund, in part because he didn't buy stocks in the fastest-
growing companies. The firm replaced him with Chris Baggini, a
``growth'' investor, only to see the fund slump 52 percent through
Friday as growth stocks plunged.
``We caught it on the chin,'' said Bill Miller, Villanova's
chief investment officer.
While Ellis, the former Orbitex money manager, said he's
considering returning to his earlier job as a telecommunications
analyst for a brokerage firm, he hopes he'll find a job as a money
manager. In the meantime, he's gutting, plumbing and rewiring his
Southampton home.
``My biggest mistake was that I didn't budget myself to
survive for the next two years,'' said Ellis, whose bill for the
Manhattan office lease last year ran $20,000 per month. ``My
expectations were too high.''
--Deborah Stern in Princeton, New Jersey, through the New York
newsroom (609) 279-4138, or destern@bloomberg.net, with reporting
by Robert Dieterich in New York/pas/dp/tm
Story illustration: To chart the Nasdaq Composite's performance |
