Now ten years on from the peak of the dot-com boom, Alliance Trust Asset Management's Matthew Strachan wonders what lessons have been learnt?
Strachan, manager of the group's North American fund, says there has been developments in four key areas.
1. Much of the hype HAS been realised.
"It has taken 10 years, but actually much of the hype has been realised. Technological advances continue to astound, peppering our language with new terms and it is now impossible to imagine working without the internet.
2. SOME technology stocks have done incredibly well.
"Some technology stocks, the winners, have done incredibly well. They have seen sales and profits grow well ahead of GDP and most significantly have massively strengthened their balance sheets, freeing themselves from the vagaries of the credit markets when they need to make large capital investments.
3. Valuations are VITAL to success.
"Even though there have been some great technology winners almost all are still below their share prices of ten years ago. This is an important lesson, valuations matter. High valuations often take a long time to grow into and over paying for an investment can ruin returns for many years.
4. Dividends DO count.
"When capital returns are meagre, or even negative, shareholders have no protection if they receive no dividend. Very few tech companies paid dividends back in 2000 and this also had consequences for the way companies deployed capital. Without the discipline of having to pay dividends many companies splashed out cash on expensive acquisitions without proper attention to returns. A corrosive mix for shareholders. A healthy dividend policy demonstrates that shareholder returns are high on managements list of priorities."
