I recently came across some old Clients Letters from Tweedy, Browne, and almost ten years later they are still a delight to read. Hereby some excerpts around the peak of the tech bubble:

March 2, 1999:

A rising tide lifts all boats. However, the gains experienced by the S&P 500 were concentrated in a small number of stocks dominated by technology companies. Of the 500 stocks in the S&P 500, 3% of the issues, 15 stocks, accounted for 52% of the Index's return. Of those 15 stocks, 9 were either technology or communications companies. If you owned only those 15 stocks, you had a stellar year. Most value investors did not.

In a year like 1998, the overall performance of an index is not indicative of the performance of stocks in general. For example, the performance of the equal weighted version of the S&P 500 shows a gain of only 13%, or less than one-half of the overall index (.) This disparity is much more pronounced in the NASDAQ Composite Index. Although the Index is comprised of nearly 4,700 separate stocks, only 5 stock account for 50% percent of the Index's performance. Microsoft alone represents approximately 27% of the Index.

March 23, 2000:

On Priceline.com: The company went public in March 1999 at $16 per share and shot up to a peak of $138 on May 7, 1999 (.) By October of last year, the stock had plummeted to around $7 per share, and some Wall Street analysts were saying the company's business plan may have been "flawed." Amazingly enough, no Wall Street analyst rated the stock a "sell"; its worst rating was "hold," and many buy recommendations still existed. Today the stock sells for less than $3. A decline from $138 per share to $3 is nearly 98%.

Little did we know that as we were finishing last year's client letter and trying to explain why we had not participated in one of the greatest gold rushes in Wall Street history, the party was about to end.


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