OK, you are bullish. You think that the stock market has now shaken off its slumber. You believe that we will have growth, but not a huge amount of growth in the world. Guess what? I have a portfolio, an all-gunner portfolio that includes the wildest traders of all time.
I've done this a couple of times before, mainly with the CANDIES, which stood for Chipotle (CMG), Amazon.com (AMZN), Netflix (NFLX), Deckers (DECK), Intuitive Surgical (ISRG), Express Scripts (ESRX) and Salesforce.com (CRM) and FADS CAN, which stood for F5 Networks (FFIV), Apple (AAPL), Deckers, Salesforce.com, Chipotle, Amazon and Netflix.
The original CANDIES names were introduced on June 3 2010. We continued to come back to them consistently, though updated them to FADS CAN in November of that year, dropping Intuitive Surgical and Express Scripts to be replaced by F5 and Amazon. All of these names, with the exception of AMZN, faltered significantly during the journey since 2010. But they are all (with the notable exception of ISRG) coming back from the dead.
The CANDIES acronym highlighted the sweet high growth of these names. When we switched to FADS CAN at the end of 2011, the idea was to drop ISRG and ESRX (both good calls as ISRG growth was in question and ESRX, while well positioned, doesn't have the same hyper growth it used to). The FADS CAN acronym implied that the names in our index were NOT fads, they had long-term lasting outsized growth that were not flashes in the pan.Needless to say, the performance of these gunner stocks has been nothing short of mind-blowing. That's because the stock market loves growth above all. We updated the index to FADS CAN on Nov. 2, 2010 to include F5, Apple, Deckers, Salesforce, Chipotle, Amazon, and Netflix. Since then, the index is up 95.5% vs. the S&P up 53.1%. CANDIES had been created on June 3, 2010 (just about six months earlier) including ISRG/ESRX (we swapped those two for FFIV/AMZN). If we backdate the current index to June 3, 2010 it is up 161.9% vs. 65.7% for the S&P. Growth is a prized possession and there are always mutual funds that will pretty much pay anything for it and anyone who is a real bull will treasure this new list. I'm playing no favorites. Let's do them in alphabetical order with a rationale for the inclusion of each, besides the fact that they are among the wildest traders in history. In the world of March Madness, these aren't three-pointers, they are four-pointers, mid-court swishes, Momentum Monsters. 1. Amazon. Amazon is a defiant stock, defiant in that it refuses to be contained by the traditional valuation methods. In fact, it's the anti-valuation stock, meaning that as long as sales keep growing, no one seems to care about the profits, or losses for that matter. It is an extraordinary anomaly: a stock that people love because they love the product and are huge believers that one day, maybe, it will make a lot of money. But right now revenue growth is all that matters. The amazing thing here is that I think this stock would go down if they started focusing on profitability because that would be a sign that the growth runway is, at last, at an end. People didn't like the last quarter because it had an ever-so-slight downtick in sales, including some concerns about international growth. It amazes me that some analysts don't believe that the company could put through a price increase to one of the most tremendous bargains of all time, Amazon Prime. I think it will be no different from when Costco (COST) raised its card price and almost no one balked. But let's not get too positive on fee increases because all that matters here is more and more revenue growth. 2. Chipotle. Who else had 9% same-store sales growth? Not Costco. Not Whole Foods (WFM). Not Starbucks (SBUX). Not anyone. It was a tour de force number, an eye-popping level of growth based, in large part, on the company's ability to convince people that it is indeed the anti-corrupt-food-chain entity. If you don't believe me, check out the hilarious Industrial Farm Information Bureau videos starring, Ray Wise as Buck Marshall. It's all about how Chipotle, even though the stuff tends to have a ton of calories, is definitely not a processed food company like its one-time parent McDonald's (MCD). It's one of the cheaper stocks in these 15 gunner stocks, selling at "only" 43x next year's earnings. 3. Facebook (FB). My charitable trust Action Alerts PLUS had a huge hit in this and, for the first time in ages, I can say I wasn't greedy enough. This is a company that is laser focused on PROFITS, particularly mobile profits, and it's driving them incredibly fast. Some of this is because the advertisers love it and the viewers seem to like the ads. Some of it is because of the demographic and the 1.2-billion-people love affair. But most of it is that Facebook is your identity. It's you and they can do a lot with you, much more than just entertain. But that's sure a start. How much would an advertiser pay for individual smart advertising to 1.2 billion? A lot more than the $170 billion capitalization of Facebook captures. Yes, the opportunity is that huge. 4. Google (GOOG). Here's something to think about. Google's probably the cheapest stock on the list here, with a 22x price-to-earnings ratio. Chalk it up to the law of large numbers. Google just can't get 50% earnings or sales growth. It's too big. But this is the company that has more fingers in more pies than I have ever seen (cell phones, personal computers, search, advertising, telecommunications, wearables, cars, entertainment, you name it). Google has so many opportunities to make money that I don't even think it can take advantage of them all right now. But it will. 5. Michael Kors (KORS) has become the go-to momentum play of accessories and high end of retail that has always been filled with gunner names like Deckers and Fossil (FOSL). Michael Kors, like so many other Momentum Monsters, defies the shorts, putting on very-high double-digit same-store sales. That's how you get a 31 P/E for a handbag company. There is a scarcity of non-tech high growers and Kors can make any momentum fund look diversified. I like the company, but this move to the $90s from the $70s happened in a straight line. That's what happens when the shorts panic and go nuts (Exhibit A for this is Green Mountain (GMCR), which is no longer a Momentum Monster and is, instead, a ward of Coca-Cola (KO)).
6. Netflix. Does Netflix have to do anything but keep adding new members? No. Netflix is what I call an opportunity stock, meaning that its opportunity is far outstripping the size of its market capitalization. You can't look at its plus-100 P/E multiple, as that misjudges what it is worth. Instead, look at the $26 billion market cap and recognize that someone, anyone, Google, Apple, Microsoft (MSFT), would see its stock SPIKE if it paid a 35% percent premium to the current stock price. Now, I know that it is somewhat absurd that you can value a company just on how many people sign up, but this is not a company that's trying to make big profits. It is trying to become the dominant online entertainment company and for that it is willing to sacrifice profits for certain. 7. Priceline.com (PCLN). If Wall Streeters weren't such snobs, they would recognize that this is the de facto way that people travel now. It is a terrific play on the consolidation of airlines as they now charge you a fortune. It is the way to stay in a hotel when almost all hotels are the same. It is a terrific emerging-growth play, one of the greatest for that matter. All this for 31x earnings. And yes, if it were to split it would be fabulous, but don't count on it. (I know splits mean nothing fundamentally, but remember, they do attract retail investors, as we know from when Salesforce.com successfully executed its four-for-one split). 8. Regeneron (REGN). You knew there had to be a biotech in here somewhere. I debated putting in Gilead (GILD), but it moves too slowly for the momentum players out there. Then I thought about Celgene (CELG), but the momentum guys have been leaving it ever since it failed to blow out the numbers last time, even though this one is cheaper than Pfizer (PFE) or Merck (MRK) or Lilly (LLY) on the out years. Then I figured, how about Biogen-Idec (BIIB), but it's just had a huge move on Tecfidera, its multiple sclerosis drug. All three are part of my Four Horsemen of the Big Pharma Apocalypse, the companies that are catching and passing the old behemoths with new drugs and multiple franchises. So, I am defaulting to Regeneron, a total momentum name that has a blockbuster, Eylea, to combat macular degeneration, but it also has something very big for cholesterol that could be this year's business that seems very misunderstood by Wall Street. Regeneron's the go-to momentum name in the book. Keep an eye on Alexion (ALXN), Seattle Genetics (SGEN), Jazz (JAZZ) and Pharmacyclics (PCYC) as terrific players on the horizon. 9. SolarCity (SCTY). Elon Musk is a genius. Come on, give it up for him. And he's got what everyone wants, a one-stop shop for solar panels, including the financing and installation. He's got governments backing this kind of program. He's got the younger generation clamoring for it. My kids are insisting that I go to SolarCity and get some of these panels, as if it is a mall store! Musk has captured the moment for certain. 10. Stratasys (SSYS). Do you really think it is possible to have a Momentum Monster index without having a 3D printer stock amongst them? I don't think so. We have examined these stocks nine ways to Sunday and we think that Stratasys has the widest product portfolio and it barely took a punch when 3D Systems (DDD) lowered the boom recently. 3D printing has to be one of the greatest hype jobs I have ever seen. The media loves it (check YouTube). My friends who use these industrially swear by this company over DDD.
11. Tesla (TSLA). In the world of momentum, Edison lost and Tesla won (as in Con Edison (ED), the utility, vs. Tesla the car company. Have you test driven one of these? You have to understand that the car itself, like Netflix, is driving the stock. When you speak to anyone who has one, anyone who has driven one or anyone who salivates over one, they all want to own a share or two of this one. Plus, Musk really gets how to drive a stock. He sets reasonable expectations and then crushes them. He fully takes advantage of the government's emphasis on electric vehicles. And he even gets that you have to have to get a stock that moves real fast -- a China story. China wants electronic vehicles too, even as, of course, they are plugged into a coal-based system. Long live Tesla. Oh, did I forget to mention that there are no valuation parameters in this earth that can explain the $24 billion valuation? But as momentum players know to ask, "so what?" 12. Twitter (TWTR). When you think Momentum Monster you better be thinking Twitter. Here's a company that disappointed right out of the chute, got hammered for it and then comes right back for more? This is insanity for those who care about value, as we know that the number of people who come to Twitter has slowed. But Twitter's got a singular concept. It is a personalized news service and that's got appeal to people who don't even ever have to Tweet. You must believe that Twitter is going to reaccelerate its signups if you are buying it, because otherwise it will most certainly lose its momentum. Understand that Twitter is also one of those companies that Microsoft, Apple or Google could buy and their stocks would go up. That's because Twitter's sui generis. No one else has anything like it and, most likely, never will. 13. Under Armour (UA). In "Get Rich Carefully," I write about stealth technology, the kinds of companies that are engineering products where engineers didn't use to tread. That's UA to a tee, no pun intended. Kevin Plank, the self-proclaimed world's sweatiest man, invented apparel that keeps you cool when it's hot and clothes that warm you when it is cold. His company is a tech company for fabric and I think now that he is going overseas, this could be one of the great growth stocks of the era. With an $11 billion market cap, trading at 58x earnings, this one better keep putting up numbers like the last quarter. The buyers sure think that it will. Who am I to disagree with a Momentum Monster? 14. Workday (WDAY). Look, I know that Salesforce.com is the logical cloud-play chit in the Monster lineup. But Salesforce.com, like Gilead, just goes up OVER TIME! Momentum people want it and they want it now. They want GOBS of points, not this 73-cent gain stuff. Workday, which is the human capital, soon-to-be-all-things-finance software-as-a-service cloud-based company that is allowing whole sections of what some would call dead weight and others would call non-revenue producing to be curtailed so the bottom line swells the moment you bring them in. I love this company, but the stock's price is so hard to justify because everything must go right. It probably does. 15. Yelp (YELP). My partner David Faber always asks me what the key to this market is at any given time. This is a legacy of when the late, great Mark Haines used to call me Jim Bob Cramer from the Church of Whatever's Working Now. There's always some stock that the momentum buyers love that they will take wherever they want it. No resistance. When Bob Dylan croons, "but for the sky, there are no fences facing," he's not speaking about Mr. Tambourine Man, he's speaking of Yelp. This is a company that, like Facebook and Google, is in total synch with the holy trinity of social, mobile and the cloud, plus it's a terrific connectivity play to all sorts of businesses and services, the genuine, living, breathing Yellow Pages. It's got a better model, though. People it doesn't pay write reviews and then the Yelp salesforce calls the entity being reviewed and solicits an ad. It's a naturally virtuous circle. Now, I have left a ton of momentum stocks on the table. And I have left plenty of room to get up to 20 if I have to, because of submissions that you may have. But right now, if you were to go out six months and buy calls on these Momentum Monsters of the Midway as a hedge against a huge rally -- and I always speak of the need to hedge yourself against a rally -- these would be the 15 I would use to protect yourself from the upside or participate in it if you are outrageously bullish, as so many are.
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