It's playing out exactly as it is supposed to play out. The companies that are riding the big growth themes go higher. The companies that help themselves with aggressive buybacks and big dividend boosts go higher. The companies that sit there, the ones that don't get busy living, are getting busy dying.
Let's take Facebook (FB). The simple fact of Facebook is that it is the fastest-growing big-cap stock in America and that's because it is surfing the fastest-growing theme in American, social, mobile, the cloud and, let's add another, connectivity.
This is a company that owns the young-person demographic all over the world that has a product that works best when on the go. It is the modern way, other than Google (GOOG), for advertisers to connect with potential buyers. It ends that old saw about advertising -- you know, 50% of advertising works. I just wish I knew which 50%. Here, it is 100% of advertising that works, which is why Facebook might end up being the greatest advertising vehicle of all time. It can be used for branding, it can be used for direct marketing, it can be used locally and nationally to a preselected audience that wants the product and the audience is the right demographic, meaning that it is reached before people really make up their minds and get set in their ways and become too hard to sway.
It is a company that has accelerating revenue growth and, even as its expenses are sky high, the revenues are far outstripping those expenses, which is why it has such amazing gross margins (what's left over after the cost of everything that goes into the product).
Oh, and get this. Remember that growth managers don't look at near-term earnings, they look at long-term projections, they look at the out years and this stock is incredibly cheap based on 2016 and 2017 projections. In fact, given that we have to judge a company's price-to-earnings multiple on its growth rate, one could argue that it could go up 50% and still not be as expensive as the average growth stock.
Of course, this is a day made for the social the mobile and the cloud, hence the incredible numbers from ServiceNow (NOW) and Concur (CNQR), two cloud-based companies. This is the theme for this time, the one I start "Get Rich Carefully" with, so people can understand the valuations and recognize at least why these stocks are being bought, even if they can't bring themselves to pull the trigger. I first learned of Concur, which I am talking to tonight, when I was out at DreamForce, the Salesforce.com (CRM) convention of all things cloud. Oh, no wonder Salesforce.com is up 5%. It is at the epicenter of the revolution.
The second group of stocks doing well? The ones with self-help. Take a look at Viacom (VIAB). Here's a company that keeps buying back share after share and it's bought back another 10 million shares this quarter. The float has shrunk from 716 million six years ago to 454 million shares. That's why I always say in a crisis that you should think about buying this stock because the company is right in there buying with you.
The next group? How about stealth technology stocks, like I write about in "Get Rich Carefully?" One of my favorites, the stock that many of the so-called smartest people criticize me about is Under Armour (UA) because this is a technology company in apparel clothing (pun intended). Here's a company that reported sharply-higher-than-expected earnings because of its differentiated product and because it has big plans for international growth and it is executing perfectly on them.
This company is a marvel of engineering and, of course, it is a company that benefits from apparel that keeps you warmer and is lighter, the ideal combination for athletes. No wonder Notre Dame switched to it!
Harman International (HAR) is another that fits this bill. It isn't just a speaker company. It is an engineering company that makes the world's best audio equipment. The lowest-cost producer of the best sound equipment, who doesn't want that, especially if you can get it in your car where you spend more time listening than just about any other moment.
The last group? How about the biotechs. Did you see Alexion Pharma (ALXN) today, one of my favorite orphan drug companies? This company reported one of the quarter's biggest beats because it has drugs that can command high price points because they are solving rare disorders.
Sure Celgene's (CELG) down. You know why? Because it only bested the numbers and didn't blow them away. Yet they are scheduled to hit my $15-a-share number in 2017 that I suggested might be doable in "Get Rich Carefully." You are talking about a tremendous growth company that only sells for 11x out-year earnings? That's absurd.
Yep, the companies surfing the big themes. The companies helping themselves. Those are the winners today. And they aren't done winning.