Here's a quiz. What do you do when there's no growth discernable either here or the rest of the world? The answer? You reach for growth wherever you can find it.
And that's what's happened today. Think about the sequences of events in the last few weeks. First, the Fed says things aren't strong enough to hike rates. Second, we see China putting up very weak numbers. Third, we have major industrial companies like Caterpillar (CAT) say things have slowed down. Fourth, we have housing weakening while non-residential construction surveys show a definite pause in building. Fifth, we have major mineral and mining companies like Alcoa (AA) say things have gotten quite weak in basic metals. Sixth, we have Delta (DAL) yesterday talking about a developing wide-body airplane glut. Seventh, that great job-creating engine, oil and gas, has gone almost full stop because of a huge glut in anything energy.
Finally, eighth, the coup de grace: We have the world's largest retailer, Wal-Mart (WMT), singing the blues about the need to stop the death by a thousand cuts of weaker same-store sales.
You put all these together and you get something that we've seen happen time and again in periods of economic softness: Buyers cut loose from the industrials and go for the gusto, they return to growth.
Where is there real growth in company revenues and prospects? The first place you look is biotech. Here's a sector of the market that switched from bull to bear overnight. Yep, we have had a full-blown bear market in anything that even smacks of biotech. It's been a one-way ticket to sheer hell for weeks now, augmented by fears that the Democratic presidential candidates in their first debate would call for wholesale rollbacks of the major profit source for many of these companies, price increases.
But with a slowdown that has now become obvious to everyone, and with the Democrats choosing to do nothing more than make offhand comments about the power of Big Pharma, buyers returned to the group with a vengeance. Celgene (CELG) and Gilead (GILD), poster boys for the selloff, are rallying two bucks each.
Regeneron (REGN), after a definitive lull, returned to the huge gains we got spoiled by, as did Biomarin (BMRN). I couldn't believe it got hammered after that great interview we had with CEO JJ Bienaime on Mad Money in days of yore, like Monday. Now it's up 10 from the bottom a couple of days ago.
How badly do people want growth? My charitable trust has been buying Biogen (BIIB), attempting to catch a bottom of a stock that has almost been cut in half, declining from $480 in March to $254 today before it roared higher a few minutes after the opening. Believe me, that's no coincidence. It's a sign of growth desperation, looking for it wherever it could be found now or even, perhaps, in the future. The hunt is on.
Second, the Internet. Yes, the Internet. It's been a house of pain for all who have entered it lately. Google (GOOGL), which was supposed to be a new favorite after it broke itself into Alphabets, began to trade like alphabet soup, and I don't mean that as an insult to Campbell Soup. Today it got its mojo back, even though nothing's happening of any note.
Did you see Facebook (FB)? It's hard to call a stock that's up more than 20% a dog, but let's just say it's been spending some time of late in the bowwow chateau. Someone released the hound today and it's showing some real alacrity to the upside. (Facebook and Google are part of TheStreet's Action Alerts PLUS portfolio.)
And how about Amazon (AMZN)? Yesterday, Doug McMillon, the CEO of Wal-Mart, laid out a long-term vision that included blunting Amazon, which is becoming a mortal enemy of the largest brick-and-mortar retailer in the world. It was a bit of a delayed reaction but today investors seemed to reawaken to the power of this brand and how it's taking share from everyone, so the stock's exploding upward.
Oh, and how about the Internet's moral equivalent of Biogen, Alibaba (BABA)? The Chinese Amazon has started roaring again, in part because the Chinese consumer has to be heartened that the fall of the Shanghai index has been halted, regardless of who or what halted it. We know Jack Ma put out a mea culpa letter not long ago and has been going on a charm offensive to talk about how his company's long-term health is strong. Guess what? In a growth-starved world, people are buying it. The stock seems, at last, to have put in a real bottom.
You want a group that's really been gripped by the roaring, raging, rotating bear, take a look at the mauling of the cybersecurity stocks. Until today. The best of the group, Palo Alto Networks (PANW), is on fire. Can the others really be that far behind?
Remember the cloud, that once-unassailable area of intense growth? It's been shunned of late. Red Hat (RHT) reported a magnificent quarter and people yawned. Adobe (ADBE) had a solid analyst meeting and the stock immediately lost 10%. Salesforce.com (CRM) attracted 160,000 people to Dreamforce and did a ton of business and nobody seemed to care at all. I liked the pure growth that Workday (WDAY) generated, said so to the CEO, Aneel Bhusri, when I was in San Francisco. At the time, I felt darned lonely because I was being drowned out by a chorus of, "Hey, hey, you, you, get off of my cloud!"
With the hunt for growth back on, though, now it's cloudy with a chance of profits! The stocks are, at last, getting their due.
Even the growth semiconductors, once so loved but pawed by every bear in the forest, managed to stage a rebound. Avago (AVGO), Skyworks (SWKS), NXPI (NXPI) and Qorvo (QRVO), which had become the four stooges (I am counting Joe and Shemp along with Moe and Larry, if you have trouble with math), actually went higher, and at one point seemed to be recognized as actual bargains when you consider all the consolidation that's occurring among the lesser actors in the group. It may not last -- as in "Not so fast, Larry" -- but maybe they are being upgraded to the Marx Brothers, with the disappointing Qorvo always capable of acting like Zeppo after a night of too much Cuervo, likely to stumble again. Still, it's always nice to see a pulse. (Amazon and Skyworks are part of TheStreet's Growth Seeker portfolio.)
How great is the gusto today? People are willing to overlook the alleged transgressions of Netflix (NFLX), which last night reported a disappointing domestic subscriber number. The problems with Netflix, though, were like Vegas, they stayed in Netflix.
Now, as with any day, there are some definitive anomalies. The bank stocks, so heavily bet against, are turning in a stellar session. How can that be? I think it's because they are so darned cheap historically, the cheapest they have ever been in my 35 years of loving stocks. That's right, when you judge them by their tangible book value, their cash on hand, they are ludicrously low, with the cheapest being Citigroup (C) and the most out of whack being Goldman Sachs (GS), which has always traded at a huge premium to its book value.
Today, though, we got a real wakeup call. Goldman Sachs disappointed, and the stock went up anyway. Citigroup blew away the number, and with the cash on hand so exceeding the stock price investors, said "Enough already, it's so low down it looks up to me."
Remember how these rotations work. You can't get comfortable. In an overbought world, you could argue that all that happened here is that buyers reverted to the ridiculously oversold groups in the market -- high growth and banks. Still, though, unless you are short them, like so many hedge fund managers are, it's nice while it lasts.
