This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Growth Stocks: 7 Rallying Stocks With no Profits (Yeta¦)

James Dennin, Kapitall: Investors are flocking to growth stocks that don't have profits yet. Is this strategy wise?

In an important sign that the bull market has returned after a brief sojourn in January, many of the top gainers on the Russell 1000 index are unprofitable. Analysts say that the trend indicates greed and fear of missing out have become investors' top motivation. 

Performance on the Nasdaq Biotech Index also supports the notion that growth stocks are making large gains. That index is up about 25% over the last two weeks, even though only two-thirds of the companies show a profit. 

[Read more from Kapitall: Chen Lin’s Perfect Biotech Stocks Prescription: Buy Low, Sell High!]

In addition, it is important to remember that part of this broad bull run is the result of investors pulling capital out of foreign markets, leaving American stocks as investors' most attractive choice. 

But the recent flood of tech IPOs from companies like Seamless and CandyCrush – which are very trendy and popular but not very remunerative — suggests we're in a bull market.

We decided to build a list of stocks that would give us a better idea of what's behind the trend. We started by screening for unprofitable stocks that are rallying at least 20% above their simple moving averages for the last 200 days (SMA200). That narrowed our screen to about 400 companies. 

That was too broad, so we set the parameters even higher and narrowed our screen to companies trading at least 60% above their SMA200. We focused on big names, and we only included companies with a market cap above $2 billion. We were left with six companies on our list. 

There are two ways to play this list. Either the market has gotten one of these companies wrong, making them a very strong short candidate, or the market's gotten them right. If that's the case, then the company's first profit would probably support another jump in share price — particularly if it prompts short-sellers to cover.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs