Mr. Sensitive

November 29, 2013

FSX Friday Update

Filed under: Uncategorized — lbej @ 17:17

This abbreviated trading week saw the tech-laden NASDAQ Composite sprinting ahead, up 1.7%, while the Dow and S&P 500 barely budged from their starting points.  The NASDAQ, in case you forgot (or never knew), is the home of the more speculative stocks in the U.S. equity market due to less stringent listing requirements, and the NASDAQ Composite is the index that led the way in the late, great, turn-of-the-century technology stock bubble.  But this recent outperformance isn’t due to the continued strength in speculative small- and micro-cap stocks so much as crowding into large- and mega-cap stocks, especially in the biotechnology sector.  Three of the best-performing large-cap stocks this year are biotechs:

  • Celgene—market cap of $67 billion, up 106% in 2013
  • Biogen IDEC – market cap of $69 billion, up 99% in 2013
  • Gilead Sciences – market cap $115 billion, up 104% in 2013

These are huge moves for large-cap stocks.  The year-to-date gains in Google (+50%) and Amazon (+57%) pale in comparison, and even Priceline (+92%), the first S&P stock to top $1,000, can’t keep up.  Why do I single out these stocks?  After all, they are highly profitable, well-run companies with solid growth prospects—they’re going to be around for a while, regardless of the direction the market takes in 2014.  I single them out because this is where the wealth destruction occurs in equity market bubbles—solid, large-cap growth companies.  Folks didn’t lose their shirts in the 2000-2002 bear market investing in Pets.com and its ilk, even though those flame-outs are the poster children of the era.  The epic wealth destruction occurred in well-known, profitable companies, many of which are still around.  Three current Dow components—Microsoft, Cisco and Intel—accounted for over $1 trillion in wealth destruction in those two-and-a-half years.  Add Oracle, Sun Micro, Lucent and EMC and the loss tops $2 trillion.  Throw in Nortel, JDS Uniphase and Worldcom and we’re over $3 trillion lost.  That’s 10 stocks, $3 trillion in value wiped out, and not a dot-com suffix among them.

What’s the point?  The point is that when the bubble bursts, not all the highfliers will go to $0, but they’ll be able to do plenty of damage to 401(k) accounts and consumer confidence anyway.  Another point is that I love market history.

The Family Stock Index tacked on another 1.1% in the holiday-shortened week to close at 17,172, less than half a percent from the all-time high.  My guess is that we take out the high early next week and that it’s every bit as uninspiring as the last fifty all-time highs have been.  I complain about the S&P trading at 19 times trailing earnings and the Nasdaq 100 trading at 21 times, but by my calculations the FSX is at nearly 24 times trailing EPS with earnings expected to decline in 2014.  It’s indefensible, really.

Advancers

  • Ruby (RJET) +5.3%.  Do you realize that Ruby was up 102% in the first three months of 2013 and since then she’s been treading water?  Not only that, but now Zondro’s been able to catch and pass her in the year-to-date performance standings (+109% to +98%).  But if investors are looking for bargains, RJET qualifies; at less than 9x earnings, Ruby fetches half the multiple of the S&P 500.  Unless the price of jet fuel is about to spike, we could be looking at another double for Ruby in 2014.  (Zondro, on the other hand, smells like he rolled in puke.)
  • Katie (CATY) +5.0%.  Katie, on the third hand, trades at an inexplicable 20x trailing earnings, and those earnings are going nowhere.  Investors have driven CATY up more than 40% this year, and they’re liable to have to rethink their positions if/when Q4 earnings disappoint.
  • Marcus (MCS) +3.9%.  Marcus isn’t cheap, either, but he pays a reasonable dividend (yield of 2.4%).  With his paternity leave almost over, it would be reasonable for investors to start selling; that they haven’t bodes well for Marky’s return to work.  He has a secret weapon (if he remembers it): baby pictures.  Coworkers will be powerless in the presence of baby pictures.
  • Nicole E. (NICE) +3.6%.  I can’t remember the last time Nicole got to visit the Pfaff, but we’re looking forward to a visit from her and Justin this week.  Holy crap, I almost put an exclamation point on that last sentence—maybe it’s a good thing Katie had to work today.  She’s been on vacation all week and her influence is powerful.  Another day and I might have been sitting on the couch watching Nashville and playing Candy Crush.  I really dodged a bullet there.

Decliners

  • Icarus (FAST) -1.8%.  I can’t remember the last time Icky got to visit the Pfaff—I can remember the smell, though.
  • Charlotte (ICE) -1.9%.  Charlotte took an overnight bus up to New York to visit our Yankee siblings, and it wasn’t the Night Bus from Harry Potter.  I know I was disappointed when I realized that, and it seems that I wasn’t alone.
  • Lucas (LEI) -2.9%.  Lucas failed to hold $1 this week, closing at $0.99.  I like to see a $0.99 price sticker on closeout razors, but a zero-handle on an FSX component isn’t so appealing.  Reagan and Jenny helped me find a new ticker for Lucas, though, and I’ll be announcing that change (along with several others) in a few weeks.  In the meantime, Lucas still has an outside shot at wresting the title of worst-performing FSX member away from two-time defending champ, Zero.  In a related point, razors are stupid expensive.
Name Ticker 11/29/2013 Change
Brinkley BCO $33.53 +0.07
Charlotte ICE $213.29 -4.12
Dustin DST $88.30 +0.19
Ghost Marisa MOLXA $38.62 +0.07
Icarus FAST $46.53 -0.83
Jenny JNY $14.04 +0.15
Jodi Ann JOY $56.56 +1.44
Justin SCI $18.07 -0.03
Katie CATY $27.63 +1.31
Lee TGI $73.94 -0.21
Lisa LNCE $28.81 +0.72
Lucas LEI $0.99 -0.03
Lulu LULU $69.72 +0.30
Marcus MCS $14.59 +0.55
Mario T.E. MGEE $55.95 -0.58
Mario T.Y. MAR $47.02 +0.10
Namilita NL $11.67 +0.29
Nicole E. NICE $39.36 +1.36
Nicole M. COLM $69.39 +1.95
Reagan REGN $293.86 +0.18
Ruby RJET $11.26 +0.57
Wilson WILC $8.20 -0.10
Winston ED $55.21 -0.71
Zero ZAGG $4.24 -0.05
Zondro ZQK $8.90 +0.24

 

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