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20 years on from the dotcom bubble: four key lessons

The dotcom bubble reshaped markets exactly 20 years ago, with unprofitable hype stocks were exposed and imploded, taking billions of investor dollars with them.

Citywire + rated Larry Puglia, a veteran equity fund manager at T. Rowe Price, was among those to have steered well clear of the rising tide of internet stocks in 1999 and 2000, but what longer-term lessons came to the fore? Here, Puglia outlines what investors need to know.

#1. Manage the media

One problematic element for investors was the wall-to-wall coverage of exciting new companies, Puglia said. ‘Even as valuations became detached from any rational financial underpinning, commentators suggested these companies were re-writing the rules of business.’

Puglia said he was also castigated for his unwillingness to deviate from the set strategy of his T. Rowe Price US Blue Chip Equity fund. ‘The media compounded the pressure, with periodic reports criticising our investment approach, our ‘misplaced’ conviction, as well as underperformance. For example, we were slated in the press on 6 March 2000, just four days before the bubble burst.’

#2. Being contrarian can be lonely… but worth it

Given his unwillingness to bend to meet wider whims, Puglia said his nerve was tested thoroughly as more and more IPOs and innovative companies came to market. ‘The…

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