Super Six Anti-Value Portfolio Flying High

NEW YORK (TheStreet) -- It's been an interesting first month for the "Super Six" portfolio, my self-described anti-value portfolio which is comprised of high-growth stocks that are exceedingly popular with investors. The portfolio includes Facebook (FB), Twitter (TWTR), LinkedIn (LNKD), Amazon (AMZN), salesforce.com (CRM) and Netflix (NFLX).

Each has a unique position in the market; each has brought forth innovations that have been well received by the consumer, including yours truly. As a collective, these companies are light on profits to a varying degree, but investors are willing to pay up for high revenue growth and the prospects of rich future cash flows. While they are of better quality than many from the 2000 era tech wreck, they are nonetheless priced for near perfection.

However, my value-based dislike of these companies due to their current valuations, and risk in some cases of obsolescence, and competition in others, has not been rewarded. As a collective, these six stocks are up nearly 7% since the late December introduction of the Super Six.

All but LinkedIn, which is down 3%, are in positive territory, with salesforce.com the winner so far, up 15%. The portfolio got a huge boost yesterday when Facebook's better than expected earnings report lifted that stock 14%. Revenue for the quarter rose 63% to $2.59 billion, well ahead of the $2.33 billion consensus, while "adjusted" earnings per share came in at 31 cents, four cents better than the consensus.

Facebook is now a $150 billion market cap stock; bigger than Disney (DIS), Pepsico (PEP), Intel (INTC), Home Depot (HD), Boeing (BA) and a laundry list of other quality companies. I can just hear my brother-in-law, who at Christmas chided me for being anti-Facebook. While highly intelligent, he knows little about the markets, but boasted of his Facebook purchase in the low $20 range, saying "I just knew it would go back up!"

Reading between the lines, what he was saying is that all of my designations, degrees, experience and research mean little because I just don't get growth investing. Perhaps he is right; at this point, however, he certainly looks way smarter than I.

The Super Six, however, will likely take a hit today, given Amazon's less than stellar fourth quarter earnings release after yesterday's market close. Revenue of $25.59 billion was just below the $26.06 billion consensus estimate, but earnings per share of 51 cents were well below the 66 cent consensus.

My issue with Amazon is that the company's margins are paper thin. As a consumer, I love Amazon, use it frequently and benefit from the marketplace for goods that it has created. I just don't see how current valuations can be justified for a company that has a sub 1% grocery-store like net margin, or how they will ever boost those margins enough to justify high multiples.

AMZN Chart
AMZN data by YCharts

I can't wait to see Street.com columnist Rocco Pendola's take on Amazon's latest report. Rocco and I don't see eye to eye on much, although his take on high-flying names often challenges my deep value inclinations. As I recall, he and I have a bet on Amazon; that I now appear to be winning. But it's a long time until year-end.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Heller, CFA,CFP® is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

  Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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