Stock Shortage Is Palpable

 | Dec 16, 2013 | 2:17 PM EST
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The stock shortage that we see in ExxonMobil (XOM) is emblematic of other situations where there isn't enough stock to go around.

You know I am a big believer in companies that embrace social, mobile and the cloud because they represent the future. In a bizarre way, that explains the jet propulsion behind Netflix (NFLX), Amazon (AMZN), Google (GOOG), and, more importantly, Twitter (TWTR) and Facebook (FB).

Netflix, up 296%, Amazon, up 54%, and Google, up 51%, have been amazing performers this year and all embrace the concept of social, mobile and cloud in different ways. Netflix is downloadable to a handheld device, but it doesn't really have a social component beyond people willing to talk in other forums about what they have watched. Google's got all three, but I think because of its high price tag -- I know, ridiculous, but true -- it doesn't get the price-to-earnings multiple it should.  But so many companies think that if Warren Buffett did it this way, that they should do it this way.

Netflix and Amazon are not bound by price-to-earnings ratios. They are pure growth plays levered either to customer subscriptions, in the case of Netflix, or sales, for Amazon. Few other companies get that kind of love, so they are very hard to pin down. But short sellers always try to pin them down, based on their lack of an ability to show earnings, not realizing that shorting on valuation is a total sucker's bet. You are basically betting that there are people who will sell these two as they go higher instead of buy more as they do, which is the most common form of buying for aggressive growth funds. The shortsellers don't understand that beauty is in the eye of the beholder.

These two stocks drive people nuts, but they are very real businesses, so real that in the case of Netflix it would have been a terrific buy for a company what wants to get on track as a social and mobile player like Microsoft (MSFT) or even AT&T (T). Amazon's all about scale and heft and it has been ever since the company decided it was going to get big or go home. The dominance premium is what you are paying for.

You are getting a similar theme from Facebook and Twitter. Now these two are different animals from each other. Facebook has the ability to be very lucrative very shortly and in that sense it feels a lot like Google. Great business, terrific on mobile with many possible revenue streams besides advertising.

But Twitter, has become pure cult, the cult you can believe in in 140 characters or less. People retweet their buys of the darned thing. Hats off to Robert Peck from SunTrust, by the way, who, before the company even came public, said you had to buy it until it gets into the $50s. Voila, it is there and he pulls it to take a victory lap. Well done.

But the shortage is palpable. We don't have enough Twitters. This isn't like 1999 when one dot-com was created every minute. It's just the opposite. Twitter owns the category and so does Facebook. That's the genesis of the non-stop buying.

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