Momentum Monsters (Part 3)

 | Feb 17, 2014 | 2:00 PM EST  | Comments
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(This is Part 3 in today's three-part column. You can read Part 1 here and Part 2 here.)

11. Tesla (TSLA). In the world of momentum, Edison lost and Tesla won (as in Con Edison (ED), the utility, vs. Tesla the car company. Have you test driven one of these? You have to understand that the car itself, like Netflix (NFLX), is driving the stock. When you speak to anyone who has one, anyone who has driven one or anyone who salivates over one, they all want to own a share or two of this one. Plus, Musk really gets how to drive a stock. He sets reasonable expectations and then crushes them. He fully takes advantage of the government's emphasis on electric vehicles. And he even gets that you have to have to get a stock that moves real fast -- a China story. China wants electronic vehicles too, even as, of course, they are plugged into a coal-based system. Long live Tesla. Oh, did I forget to mention that there are no valuation parameters in this earth that can explain the $24 billion valuation? But as momentum players know to ask, "so what?"

12. Twitter (TWTR). When you think Momentum Monster you better be thinking Twitter. Here's a company that disappointed right out of the chute, got hammered for it and then comes right back for more? This is insanity for those who care about value, as we know that the number of people who come to Twitter has slowed. But Twitter's got a singular concept. It is a personalized news service and that's got appeal to people who don't even ever have to Tweet. You must believe that Twitter is going to reaccelerate its signups if you are buying it, because otherwise it will most certainly lose its momentum. Understand that Twitter is also one of those companies that Microsoft (MSFT), Apple (AAPL) or Google (GOOG) could buy and their stocks would go up. That's because Twitter's sui generis. No one else has anything like it and, most likely, never will.

13. Under Armour (UA). In Get Rich Carefully, I write about stealth technology, the kinds of companies that are engineering products where engineers didn't use to tread. That's UA to a tee, no pun intended. Kevin Plank, the self-proclaimed world's sweatiest man, invented apparel that keeps you cool when it's hot and clothes that warm you when it is cold. His company is a tech company for fabric and I think now that he is going overseas, this could be one of the great growth stocks of the era. With an $11 billion market cap, trading at 58x earnings, this one better keep putting up numbers like the last quarter. The buyers sure think that it will. Who am I to disagree with a Momentum Monster?

14. Workday (WDAY). Look, I know that Salesforce.com (CRM) is the logical cloud-play chit in the Monster lineup. But Salesforce.com, like Gilead (GILD), just goes up over time! Momentum people want it and they want it now. They want gobs of points, not this $0.73-gain stuff. Workday, which is the human capital, soon-to-be-all-things-finance software-as-a-service cloud-based company that is allowing whole sections of what some would call dead weight and others would call non-revenue producing to be curtailed so the bottom line swells the moment you bring them in. I love this company, but the stock's price is so hard to justify because everything must go right. It probably does.

15. Yelp (YELP). My partner David Faber always asks me what the key to this market is at any given time. This is a legacy of when the late, great Mark Haines used to call me Jim Bob Cramer from the Church of Whatever's Working Now. There's always some stock that the momentum buyers love that they will take wherever they want it. No resistance. When Bob Dylan croons, "but for the sky, there are no fences facing," he's not speaking about Mr. Tambourine Man, he's speaking of Yelp. This is a company that, like Facebook (FB) and Google, is in total synch with the holy trinity of social, mobile and the cloud, plus it's a terrific connectivity play to all sorts of businesses and services, the genuine, living, breathing Yellow Pages. It's got a better model, though. People it doesn't pay write reviews and then the Yelp salesforce calls the entity being reviewed and solicits an ad. It's a naturally virtuous circle.

Now, I have left a ton of momentum stocks on the table. And I have left plenty of room to get up to 20 if I have to, because of submissions that you may have. But right now, if you were to go out six months and buy calls on these Momentum Monsters of the Midway as a hedge against a huge rally -- and I always speak of the need to hedge yourself against a rally -- these would be the 15 I would use to protect yourself from the upside or participate in it if you are outrageously bullish, as so many are.

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