Nasdaq rockets 200% from ‘09 bear market low

The Nasdaq may be best known for its big celebrity members, such as Apple, Google and Microsoft, but it's the lesser-known stocks in the index that are the biggest helpers to a 200% gain the past 4½ years.

Thanks to Tuesday's powerful rally in tech stocks, which lifted the Nasdaq composite 46.50 points, 1.2%, to 3,817.98, the index is up 200% from its March 9, 2009, bear market low.

Seeing stocks double (with 100% gains) is head-turning enough, so to see them triple like this is a rally for the history books.

And making the entrance to the "200% club" that much sweeter, the Nasdaq is the first of the big three U.S. market measures, including the Standard & Poor's 500 and Dow Jones industrial average, to triple from its low. The Dow and S&P 500 are up 132% and 150%, respectively, during the same period.

"The Nasdaq happens to be in the sweet spot in the market," says Ken Winans of Winans Investments. "It's astounding."

In yet another interesting twist, despite its reputation for being home of the giants of technology, the start-ups haven't been the biggest drivers of the Nasdaq's ascent. It's actually been other forces at work, including:

• Strength from small and midsize companies. Companies with market values of $15 billion or less accounted for 29 of the 30 stocks with the best gains from the 2009 low. And half of the top Nasdaq composite performers have current market values of less than $1 billion. These companies benefited from a number of forces, says Jack Ablin of BMO Private Bank, including their focus on the U.S. economy. The U.S. economy has been healthier than other spots around the world, giving small and midsize companies that do most of their business in the U.S. an edge, he says.

• Mega gains from health care and retail stocks. While the Nasdaq is known for its tech darlings, two sectors not known for huge gains were the true winners, Winans says. Two of the best stocks in the Nasdaq were drug development companies, Pharmacyclics and ! Jazz Pharmaceuticals, which gained more than 15,000% each. And Nasdaq's stable of retailers were also big winners, including Avis Budget, up 7,300%, yoga wear maker Lululemon Athletica, up 3,200%, and discounter Tuesday Morning, up 2,800%. Even big retailers, such as Costco, have stunning gains of 200%. And online retail leaders Amazon.com and Priceline were also huge winners, Winans says, rising 427% and 1,200%, respectively.

• New entrants added to the Nasdaq. Given that many young companies list on Nasdaq, it's to be expected that the index morphs considerably over time. And lately, new entrants have been major contributors to gains. Social media companies, including Facebook and LinkedIn, have generated massive gains recently, rising 89% and 117% this year respectively. Another online-product and store-review site, Yelp, is up 274% this year.

Given that the entire market has rallied so strongly since 2009, it's to be expected that riskier, smaller companies would post larger gains, Winans says.

Investors, though, hope that larger companies, including those that export outside the U.S., will become bigger participants. "It's really paid off to be small and midsized companies concentrated at home," Ablin says. "But it's starting to get tired."