An SVA Perspective on the Nasdaq and Cisco Systems

Markets today feel expensive and in some cases historically so. The Nasdaq 100 is trading at roughly nine and a half times book value, a level last seen during the peak of the technology bubble in 2000.

When markets reach these valuation extremes, many investors feel compelled to step aside entirely. That reaction is understandable. Bear markets are uncomfortable and often emotionally draining. But history shows that they are not devoid of opportunity. In fact, they can be some of the most profitable periods for investors who understand valuation and have the discipline to act.

Looking Back to 2000–2002

The last time the Nasdaq traded at similar valuation levels, the subsequent decline was severe. From 2000 through 2002, the index experienced sharp and sustained losses. Yet those declines were interrupted by powerful rallies. At the time, many commentators believed those rallies marked durable market bottoms.

They did not. But they were real, tradable opportunities.

The Role of Structural Valuation Analysis

Structural Valuation Analysis identifies key price to book breakpoints that often act as inflection points during both bull and bear markets. These levels do not eliminate risk, but they provide a framework for identifying when risk becomes asymmetric in the investor’s favor.

Cisco Systems as a Case Study

Cisco Systems was one of the defining stocks of the era. From its peak near $62, the stock eventually declined to roughly $8.50. Yet on the way down, it delivered multiple significant rallies.

At its bubble valuation level around 7.4 times book value, Cisco rallied approximately 28 percent. At its super growth price, the stock rose from roughly $13.75 to nearly $23, a gain of over 60 percent. A subsequent breakout above the super growth level produced another strong advance, mirroring similar rallies in the Nasdaq itself.

Cisco finally bottomed in 2002 at its growth price, another major SVA breakpoint, before rallying approximately 75 percent back to its super growth price.

The Takeaway

This is not a forecast of an imminent bear market. Rather, it is a reminder of how markets behave when valuations compress. Investors do not need to be fully invested during these periods, but they also do not need to be absent.

If and when a bear market unfolds, there will be profitable opportunities along the way. Those opportunities tend to favor investors who understand valuation, manage risk, and act with discipline.

Structural Valuation Analysis was effective during the 2000–2002 period, and it remains a framework for navigating volatile markets today.

Watch the full SVA Focus episode here: https://youtu.be/6qATIfsZZDU

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