The cult stocks seem to be making a comeback.
Take a look at the action in Tesla (TSLA) this week. Here's a stock that has endured some hard selling ever since that miserable last quarter and yet it stills hangs in, hugging this $200 level like a champ. It has rallied two days in a row, even as the market has suffered heavy reversals on both days. And that's despite multiple "earnings" guide-downs and downgrades and an overall impression that the growth has completely stalled.
How many stocks can withstand numbers like 10 cars sold in a month in China -- when the company was hoping that at least 30% of its cars would be sold there this year -- and still be hanging in there. The resilience after those hideous numbers is pretty staggering.
I am not changing my view: great car, but I don't want to own the stock.
Nevertheless, the buyers could care less about the numbers. Remember, it is a cult stock and they are in there on every dip. The sellers seem exhausted and no really huge institutional owners seem to have broken ranks with Elon Musk's vision or execution.
I think that until we get a fully-100% battery car with similar long drive characteristics from a major manufacturer that comes in under Tesla's price, the stock will have its adherents who simply will buy it on every dip. That's the cult of the buyer. It won't end until a major manufacturer produces a car that can go 300 miles on one charge and zero to 60 in four seconds with a $40,000 price tag. No one is anywhere near that yet.
The action in the ultra-cultish Amazon's (AMZN) been terrific of late, too, if you discount yesterday's midday reversal.
I was rather surprised that a major brokerage house's big price target bump yesterday didn't take the stock over $400. But I think that Amazon has had a remarkable run and that even marking time here is a big deal. The cult lives, bolstered by a belief that when we see the results of Amazon's Web services business broken out, we will recognize that this division can, one day, be a money maker.
Netflix (NFLX) hangs in, too, and I believe that it, like Amazon, is just resting for the next move up, not down. It, like Tesla and Amazon, is so loved right now that on any fundamental basis you would be tempted to sell it into the amazing exuberance. But at $28 billion in market capitalization is it really that irrational, especially when you consider AbbVie (ABBV) just paid $21 billion for a company that has 1/7 the revenues?
Think of Netflix like this? What would Netflix be valued at in light of prices we are hearing for, say, Airbnb and Uber, if those were to come public today? When you put it like that, you have to admit that Netflix seems "cheap" to the compares.
I don't consider Facebook (FB) a cult stock because it has real earnings. But it has the taint of cult because of the purchase of WhatsApp for $19 billion and the knowledge that huge secondaries must be lurking somewhere. Still, the breakout yesterday was pronounced and very real. I think people are taking notice that it, and another stock that isn't that expensive, (Google (GOOGL)), is acting better and therefore has a chance to break out on no new news, the best kind of run if you are feeling cultish.
Finally, welcome back GoPro (GPRO), Mobileye (MBLY) and Alibaba (BABA). I think GoPro has peaked, I like NXP Semi (NXPI) more than Mobileye when it comes to autos and Alibaba? It's cheap if the Communist Party lets it be cheap.
Those are some hefty valuations. But you know what's remarkable? Even after this run in the overall averages, there simply aren't that many cult stocks out there and, for the most part, they are the same ones we have been coping with for years now. It's deal-able. It has been; it will be. And maybe that's all there is to it.