There is one formidable discounter out there, Spirit Air (SAVE), but Spirit, run by Ben Baldanza, a frequent guest on "Mad Money," has no desire to compete with the majors because one of the reasons why the majors are so profitable has to do with their willingness to drop routes that are unpopular for their high costs of operation, but extremely popular for the low-operating cost Spirit. SAVE, as the stock's symbol tells you, doesn't want to compete against the big dogs. It wants to go where they won't fly.
Yes, the airline business is that exciting right now and until this year I hadn't recommended an airline stock since 1985 when I burned my client base at Goldman Sachs with an ill-fated recommendation to buy the now-bankrupt and soon-to-be up-and-running American.
You want a real sleeper? Consider Volaris (VLRS), the Mexican discount airline that is doing the same for Mexico that Spirit's doing for this country. I think it's a steal as it has done next to nothing since coming public earlier this year, but the country's growing by leaps and bounds.
A fifth theme that will make you money in 2014? Think stealth tech and the power of innovation. When we think of tech we think of Microsoft (MSFT), Intel (INTC), Cisco, Oracle, IBM and even Apple (AAPL), companies that were at the forefront of innovation, but now seem to be content with simple line extensions with smaller form factors, although Apple's so cheap it is still worth owning.
To get real innovation these days, real progress, you have to consider companies like Colgate (CL), which is taking tremendous share from Procter (PG) and Unilever (UL), particularly in the emerging markets as it develops new products that the locals love. Other stealth tech plays to examine? How about Under Armour (UA)? This Baltimore-based apparel company is rolling out new products literally quarterly, with properties that keep you warm or monitor health in ways that you couldn't dream of just a few years ago. It is a factory of innovation.
But perhaps the most inventive major tech company out there is none other than the once-sleepy Wilmington, Del. colossus DuPont (DD). Double D is developing the most new products and reinventing itself on the fly, going from being a boring old chemical concern to being a company that feeds the world and develops health and safety devices that are pulling it away from the pack.
Dupont's hard-charging CEO, Ellen Kullman, is shaking up the company in ways that would be inconceivable not that long ago, getting out of prosaic slow-growth businesses and into proprietary products that don't need strong economies around the globe to propel sales. Next year she will be spinning off her last commodity business, her boom-or-bust Ti02 franchise, a classic little-value-added product line that makes whiteners for things like toothpaste and paint. I think the new Dupont, with little commodity exposure, will see a dramatic lift to its price-to-earnings multiple as it goes from being a boring GDP play to a secular growth company.
Ride the Four Horsemen of Biotech
Sixth theme? Biotech. Our old-line drug companies, with the exception of Johnson & Johnson have gone from venerated institutions with breakthrough science to simple creators of me-too line extensions and shrewd marketers of old drugs.
In their place have come the four horsemen of the big pharma apocalypse: Biogen-Idec (BIIB), Celgene (CELG), Gilead (GILD) and Regeneron (REGN). Each has some blockbuster franchises that are right now generating billions in sales for these companies with new drugs waiting in the wings that will produce wins for years and years to come.
Biogen Idec has a world-class multiple sclerosis franchise, including a new drug that's just approved and that's almost certainly going to reach blockbuster status next year. Celgene, just upgraded by UBS, has got a leading blood cancer drug franchise with Revlimid, but watch for its anti-pancreatic cancer and anti-rheumatoid arthritis drugs, which could allow this $164 company to have $17 in earnings power in 2017. That makes it cheaper than any of the big pharma stocks. It could rally 50% and still be less expensive than Pfizer (PFE) or Merck (MRK) when it gets there.
Gilead may have the first cure for Hepatitis C, which is responsible for about 50,000 deaths each year and has hobbled hundreds of thousands more. I think this drug, which stems from Gilead's initially-reviled but now widely-hailed purchase of PHARMASSET for $11 billion a couple of years ago, even as it had only 90 employees and no revenues to speak of, will be the biggest new entrant of 2014.
Regeneron's a company that may have the most exciting product portfolio of any of the four horsemen. Currently it sells Eylea, which is a maintenance cure for maculate degeneration, a condition that affects hundreds of thousands of people around the globe. Sales for this drug continue to exceed expectations every quarter.
But the real excitement for Regeneron is a new class of anti-cholesterol drug that can be taken by those who can't tolerate statins. The new rules about the need to take anti-cholesterol drugs regardless of your cholesterol count will play right into the hands of this soon-to-be-approved medication. I think Regeneron could have multiple years of outperformance. And if it doesn't? I think Sanofi, its partner and minority owner, buys the whole company for a huge premium to where it is trading now.
Focus on Shales
Final theme? Oil and gas. We hear a lot about this revolution in our country and there are multiple ways to play it. I think we have to focus on the success of four shales, the Bakken in North Dakota, The Eagle Ford and Permian in Texas and the Niobrara in Colorado. These are the most oil rich plays, with both the Eagle Ford and the old Permian being the biggest beneficiaries of the new form of horizontal drilling that's allowing us to find much more oil than we ever thought still existed in this country.
The Eagle Ford and the Permian can best be played with EOG (EOG), although some would say that Pioneer Natural (PXD) has the biggest repository in America. Scott Sheffield, the CEO of Pioneer, has declared on "Mad Money" that his part of the Permian contains the second biggest oil field in the world, topped only by the largest field in Saudi Arabia.