Saturday, September 21, 2013

Growth Stock Bubble

FB, LNKD, TSLA, NFLX, YELP, P, SPLK, etc... are the growth darlings of this market.  When there is a lack of corporate earnings growth, the ordinary stocks struggle to make gains.  Since we hit 1680 on the S&P in May, the market has been range bound, with a slight upward bias.  Under these conditions, where the average stock chart has leveled off, investors look for stocks that will outperform.  No, it will not be AAPL.  That is a has been with growth diminishing.

Growth stocks are the only stocks that can attract big outperformance in an environment where the the stock indexes are already up so much.  It reminds me of the dotcom bubble in 1999 and 2000.  The last year of the bull market in 1999-2000 saw most stocks lagging the indices, because the indices were being pumped up by tech stocks going parabolic, while everything else was flat to down.

We are entering the late stage of a bull market where the growth stocks massively outperform everything else.  What is the polar opposite of the most hated financial asset (long term Treasuries)?  Stocks like TSLA, FB, NFLX.  We are right in the middle of the move, with perhaps another 3 to 6 months left.  You have to be a buyer of these stocks on any dips of 5-10%.  They will rocket back up to new highs quickly.  Into the teeth of the debt ceiling debate, where fear is pervasive, these stocks will be the ones to pick up into the hole.  Coming out of the dip, they will rip higher confounding the valuation bears.  My year end targets for these momos are TSLA at 250, FB at 60, LNKD at 300, NFLX at 400, YELP at 100, P at 40, and SPLK at 75.  The Twitter IPO will drive the euphoria into overdrive.  All the while I expect AAPL to struggle to get to 500 by year end.  It will be a tale of two cities market for the rest of the year.  Get ready.

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