NYU Portfolio Managers Battle Over Crocs

Fear of Heights?

Sangani feels that a big part of the Crocs decision was based on the fact that people are scared of growth stocks at a 52-week high. Sangani says: "I think a lot of the fear in stocks trading at highs has to do with the aftermath of the dot-com bust. I believe a lot of this fear was reflected in the market with the IPO of Google (GOOG - Cramer's Take - Stockpickr) several years ago.

"The effect is more evident with newer investors because they do not do the in-depth industry research that is necessary to put a stock price in context. They simply take high multiples and low multiples at face value and believe it would be safer to simply bet on the lower multiple company and/or the company trading at a 52-week low rather than a 52-week high ."

While Sangani concedes that the potential for a big downside is a concern with Crocs, he points to research as his primary attraction to the stock. He sees the stock doubling its current share price.

Sangani explains: "I believe IAG has avoided growth stocks because there is a much higher burden of proof when communicating that a company deserves a high multiple rather than asking members to invest in a company with a low multiple. In the latter case, a presenter essentially succeeds by doing nothing; and it is up to the members to determine 'what's missing?' to reason why the company should be discounted to its peers and not voted into the portfolio. However, in the case of a growth company, with a higher multiple like Crocs, a presenter needs to prove that the multiple is well-deserved using relevant factors. The burden of proof here is higher too because the forward projections are for younger firms that do not have a long operating history."