NEW YORK (Real Money) -- Here's something to think about. When you look at the bedraggled biotech and software-as-a-service sectors, do you ever see much insider buying? When you look at the companies that are still coming public in these sectors, do you ever see any earnings?
Have you noticed that the ones coming public now are either early-stage biotechs that you would never finance yourself or incredible niche software-as-a-service players for some small vertical that you would never invest in yourself?
We are truly in the Twilight Zone of these stocks, where unless there is some consolidation or some insider buying of note, or a sense that the companies think that profits actually do matter someday, you can bet that the selling is not done.
Plus, although I am not a chartist, have you looked at the charts of these? They are among the most perfect head-and-shoulder patterns I have ever seen.
Worst of all the insiders are now thinking OK, if Facebook (FB) shot the lights out with the best growth that's actually ever been seen since the Apple (AAPL) and Google (GOOGL) breakouts, and if Gilead (GILD) could have the biggest launch in history and not go higher, how about my little software-as-a-service provider for the coffee room? How about my biotech lab that has nothing that can even be inflicted on mice yet?
Honestly, when people call in on stocks that are speculative right now from these two areas and they want my blessing, I don't even know what to say. Gilead and Facebook are executing flawlessly and it isn't enough. Meanwhile, UPS (UPS) and McDonald's (MCD) blow the quarters and they aren't even down. ServiceNow (NOW) delivers plus-60% revenue growth, something that would have gapped it up three months ago and instead it rallies a dollar and then pirouettes 10%, even as every analyst reiterates a buy rating. What happens when one breaks ranks? That's been the pattern.