Momentum Monsters (Part 2)

 | Feb 17, 2014 | 12:00 PM EST  | Comments
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(This is Part 2 of today's three-part column. You can read Part 1 here.)

6. Netflix. Does Netflix have to do anything but keep adding new members? No. Netflix is what I call an opportunity stock, meaning that its opportunity is far outstripping the size of its market capitalization. You can't look at its plus-100 P/E multiple, as that misjudges what it is worth. Instead, look at the $26 billion market cap and recognize that someone, anyone, Google, Apple, Microsoft (MSFT), would see its stock SPIKE if it paid a 35% percent premium to the current stock price. Now, I know that it is somewhat absurd that you can value a company just on how many people sign up, but this is not a company that's trying to make big profits. It is trying to become the dominant online entertainment company and for that it is willing to sacrifice profits for certain.

7. Priceline.com (PCLN). If Wall Streeters weren't such snobs, they would recognize that this is the de facto way that people travel now. It is a terrific play on the consolidation of airlines as they now charge you a fortune. It is the way to stay in a hotel when almost all hotels are the same. It is a terrific emerging-growth play, one of the greatest for that matter. All this for 31x earnings. And yes, if it were to split it would be fabulous, but don't count on it. (I know splits mean nothing fundamentally, but remember, they do attract retail investors, as we know from when Salesforce.com successfully executed its four-for-one split).

8. Regeneron (REGN). You knew there had to be a biotech in here somewhere. I debated putting in Gilead (GILD), but it moves too slowly for the momentum players out there. Then I thought about Celgene (CELG), but the momentum guys have been leaving it ever since it failed to blow out the numbers last time, even though this one is cheaper than Pfizer (PFE) or Merck (MRK) or Lilly (LLY) on the out years. Then I figured, how about Biogen-Idec (BIIB), but it's just had a huge move on Tecfidera, its multiple sclerosis drug. All three are part of my Four Horsemen of the Big Pharma Apocalypse, the companies that are catching and passing the old behemoths with new drugs and multiple franchises. So, I am defaulting to Regeneron, a total momentum name that has a blockbuster, Eylea, to combat macular degeneration, but it also has something very big for cholesterol that could be this year's business that seems very misunderstood by Wall Street. Regeneron's the go-to momentum name in the book. Keep an eye on Alexion (ALXN), Seattle Genetics (SGEN), Jazz (JAZZ) and Pharmacyclics (PCYC) as terrific players on the horizon.

9. SolarCity (SCTY). Elon Musk is a genius. Come on, give it up for him. And he's got what everyone wants, a one-stop shop for solar panels, including the financing and installation. He's got governments backing this kind of program. He's got the younger generation clamoring for it. My kids are insisting that I go to SolarCity and get some of these panels, as if it is a mall store! Musk has captured the moment for certain.

10. Stratasys (SSYS). Do you really think it is possible to have a Momentum Monster index without having a 3D printer stock amongst them? I don't think so. We have examined these stocks nine ways to Sunday and we think that Stratasys has the widest product portfolio and it barely took a punch when 3D Systems (DDD) lowered the boom recently. 3D printing has to be one of the greatest hype jobs I have ever seen. The media loves it (check YouTube). My friends who use these industrially swear by this company over DDD.

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