The Shift Makes Sense

 | May 01, 2014 | 3:05 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

clx

,

chd

,

xom

,

esrx

,

cah

Portfolio managers right now are gripped between owning earnings growth at a reasonable price and owning sales growth at unreasonable price.

I think the vast majority of the growth companies delivered on their promises, but the stocks had gone up so far vs. historical levels of valuation that they couldn't just keep going up. But once they stopped going up, they were of no use to the faux growth managers who had been hiding in them but never really understood them. They just liked them because they were going up.

But the growth-at-a-reasonable-price stocks have started to betray some of their investors. Clorox (CLX) and Church & Dwight (CHD), ExxonMobil (XOM), Express Scripts (ESRX) and Cardinal Health (CAH) have all disappointed this week. These were bought because they weren't supposed to disappoint.

So, today we are getting a bit of a shift that makes sense when you think of it. Some of the high-flying stocks are down huge to the point where they aren't as expensive historically. Call them fairly valued, not undervalued. Some of the low fliers have become expensive historically vs. their growth rates.

There's only one problem: you get three days like this and the valuations will shift again.

Oh, and don't you for one minute believe that isn't exactly what will happen in three days -- if not sooner.

Columnist Conversations

Is this the biotech revolution or the biotech bust? View Small Cap Biotechs Like Never Before: Transparency is...
Lang:
Last year saw the MC NYSE oscillator hit -300 on about five occasions, and each time a massive bounce ensued. ...
If you are in the NYC area, Bob Lang and I will be in town this Monday and Tuesday night. We'd love to grab a ...
There are no signals in IWM....Still watching zone 2 in WYNN for a potential entry. The updated chart is below...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.