Quite a Pair of Stocks

 | Apr 11, 2014 | 1:51 PM EDT
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David Faber and I are always discussing what is the key to this market. We do it as a nod to the old days, a nostalgic look at the markets when he was on "Squawk Box" and Mark Haines was the ringmaster.

I was on once a week back then, every Wednesday, and I always came with a stock that was the one stock you needed to have an eye on in order to figure out what's happening.

I said this morning that the one stock I have been following like a hawk is Microsoft (MSFT) because it's riding a better PC wave with a very good enterprise business and a new CEO, it's not expensive and has a strong dividend.

But I realize now I should have had a contrast and the contrast is -- drum roll, please -- Twitter (TWTR)!

Yes, Twitter is a company that might break even in 2014 with a consensus of 24 cents in 2015. That makes it obscenely expensive. Sure, it has the potential for earnings -- it's not a total cash flow story -- but that's still the kind of price tag that makes seasoned people blanch.

But not retail investors. They love Twitter the product, so they have bought Twitter the stock. If you chart this one you realize Twitter really was the essence of this IPO mania that's been spawned, with one difference: if you bought it at the opening you are actually UP!

The vast majority have produced losses, not gains, if you bought them in the aftermarket and most of those losses are sizable. But we have finally reached levels where that's no longer the case. First-day buyers are now underwater.

I think that if Twitter starts going up and Microsoft starts going down then the rotation will be drawing to a close.

But if Twitter keeps spiraling down, that will be a sign that the pain for the high-multiple-to-sales-or-earnings growth stocks isn't over.

Twitter and Microsoft, now there's a pair.

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