I looked at GoPro (GPRO) this morning and saw that it is up to new highs, now 77% above its initial-public-offering price. El Pollo Loco (LOCO) has doubled from its offering price a few weeks back, and so has TrueCar (TRUE).
What do they all have in common? Growth.
It's not even stellar growth; they are simply growing faster than average. And the average number of companies in this environment is barely growing. So, by contrast, modest growth looks like white-hot growth.
On CNBC, we constantly hear the hosts asking if we are being too complacent by ignoring what's going on in Russia and Ukraine and instead bidding stocks to new highs. The bottom line is that investors are willing to pay for growth. Therefore, valuations are being stretched, especially in the areas of tech and biotech, as Fed chief Janet Yellen has noted.
But that doesn't mean these stretched valuations can't get more stretched.
In fact, several talking heads have said in the past two weeks that this expansion could go on for another four or five years. I tend to agree with this, although that doesn't mean there couldn't be air pockets where the market drops by 5% at a shot.
This backdrop suggests a very receptive audience for the September debut of Alibaba Group. If people can get their hands on the stock at a $150 billion valuation, my belief is that they are going to bid it up quickly to nearly $200 billion once it starts trading.
And I believe there's a good chance that within a year or so after its IPO, Alibaba could trade up to $300 billion. If I'm right, it will be helpful to the stock prices of Yahoo! (YHOO) and SoftBank (SFTBY), which are big owners of Alibaba.
Is it right? Is it fair? An object's price has no link to morality; it just is. And in this environment, everyone is hungry for growth.
Alibaba, GoPro and others will continue to draw their fans.