We're in the Grips of a Struggle

 | Apr 17, 2014 | 7:14 PM EDT
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These high-multiple stocks have your number, or at least the short sellers of them do.

We are in the grips of a titanic struggle where companies that are inventing incredibly important drugs go down almost every day. But it is as if we have no idea how to value them. No dividends, no buybacks, no earnings. That would be fine if we had some bellwether companies in the industry that we trusted or some takeovers that would define the bounds. But the two leaders, Celgene (CELG) and Gilead (GILD) both have flies right now, a generic challenge to Revlimid and a Big Pharma/Merck (MRK) challenge to the Hep C pill respectively, so there's no backbone to the group.

In fact, these stocks are just paper tigers. You blow on them, they fall over. The opportunity to own them for a quick four points isn't worth the eight-point decline.

Same with software as a service. Nothing's changed. We aren't where they can hold yet. We aren't where they don't attract sellers that are obviously exacerbated by ETF/HFT action. 

Plus, the opportunities away from these stocks are so spectacular that you don't need to focus on them. But I think that there is a predilection to do so in part because you don't want to leave the horse that got you here, but also because you simply aren't going to make up the performance you need to close the gap with the S&P with Ventas (VTR) and Vornado (VNO) or Duke (DUK) and Dominion (D). They can't generate the alpha you need, and I hate using the Greek terms.

As the long weekend beckons, maybe we can get some perspective about stocks that were loved when they were 100% higher than now that now seem worthless in the market's eyes.

But always remember, the year is long and the winning stocks don't have to win tomorrow to make up for the losses.

Random musings: Have a great holiday!

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