Big Tech's Elusive P/E
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By Matt Richey (TMF Matt)
September 4, 2003
Yesterday, I was researching a story and wanted to cite the price-to-earnings (P/E) ratio on the Nasdaq 100 Trust (AMEX: QQQ). You'd think this would be readily available. After all, many services offer the P/E on the S&P 500 (including Multex and Barra). But several different Google searches turned up nothing.
Finally, I found a subscription website, DecisionPoint, that keeps track of the Triple-Q's P/E. The answer? A whopping 77 times trailing earnings. But perhaps even more intriguing than the number itself is how difficult it is to find.
Is anybody paying attention to the Nasdaq 100's valuation?
The QQQ -- essentially a vehicle that offers quick, easy exposure to large-cap tech stocks like Cisco (Nasdaq: CSCO), Intel (Nasdaq: INTC), and Oracle (Nasdaq: ORCL), among others -- trades over $2.5 billion per day. That's almost five times the volume of General Electric (NYSE: GE) and 50% more than Microsoft (Nasdaq: MSFT). And yet its valuation is almost completely obscure. That's frightening.
So far this year, the Nasdaq is up an incredible 38.7%. This far outpaces the S&P 500 and Dow, which year-to-date are up 16.6% and 14.7%, respectively. And this during a year that dividends received a massive tax advantage, which should've lifted dividend-paying stocks, few of which trade on the Nasdaq.
So what's going on with the Naz? Either the market is discounting a full-scale recovery in technology spending over the next few years, or else we're dealing with sheer speculation. Personally, I see more signs of the latter than improving technology fundamentals. That the P/E ratio on the Nasdaq 100 is so obscure is yet another sign that speculation may be the driving force in this market.
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