Could there be anything easier to predict than the pattern of people who drink
? Could there be anything tougher to predict than the pattern of people who engage in online auctions?
Monday may have represented the height of this market's inability to distinguish what multiple should be paid for what business. But it's not what you think. It's the old-line companies that are being valued incorrectly, not just the new companies. The reason why we like
and afford it a high multiple is because it is predictable and growing like clockwork.
That's the same reason we once liked Coke. Amazingly, in a market that is already absurdly valued, maybe the real mistake in valuing comes from Coke, not Amazon. Coke has turned out to be completely unpredictable in its trends. In fact, if there were no such things as stock buybacks, I would think that Coke might receive the same multiple as a nuclear-based utility that is subject to periodic brownouts.
Amazon, meanwhile, seems to grow at a pace so swift that it can't be measured by the human eye. In a market that only cares about top-line growth, there is no price that won't be paid for Amazon and no price that will be paid for Coke, except the one that the company's buyback determines. And if
were ever to decide that things don't go better with Coke, you can give this thing an 18 multiple and nobody will want it.
Every time you see the total absurdity of Internet valuations, you have to remember that organic growth is this market's real theme. Companies that have pure organic growth are loved; everything else is hated. That's the market's true mantra.
And we don't want just divisions that have organic growth --
, listen up -- we want the real thing. Don't create stocks to sate us; create businesses and give them to us.
When will the mania end? When the growth slows down. Has it shown any signs of slowing down? Heck, it's still accelerating. It's the Cokes that are slowing down, not the Amazons. Enough said.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at firstname.lastname@example.org.