This is the week. This is the week where the big investors anoint their best stocks and start buying them. They need to be in stocks because it's a good year and they need to be in the ones that they can buy and buy some more because they simply do not think they are expensive here and could go much higher.
What qualifies as one of these anointed stocks? First they have to be having a great year. Second there is a long-term thesis to allow you to pay much more than is currently warranted. Third there is a belief that nothing can happen to go wrong between here and yearend.
Without further ado let me give you the anointed buy list including a bunch you may not have heard of our thought about.
Here's my top 15 stocks that I think will be bought into yearend, done alphabetically so not to slight anyone.
First, is a Chinese stock, Ali Baba (BABA) . We know this is the world's biggest retailer and it is growing great guns and just had a terrific Singles Day, the made-up holiday for shopping that the Chinese Communists came up with. It may be up 114% but what price wouldn't you pay for the biggest Chinese stock in a year where the Chinese market became investable again.
Second is Adobe (ADBE) . People want so much to own cloud names and it is very clear that Adobe has become a pure cloud name with amazing sales numbers and plenty of room to run. The stock may be up 76% this year but every time it comes down buyers clamor. It's last quarter shocked people with its growth and its new stuff, based on artificial intelligence, is a beauty to behold as we saw last week when we were at their San Francisco office.
Third is Align Technology (ALGN) , the maker of Invisalign braces that are being used by the younger generation to look their selfie best. This stock is right in the sweet spot of those trying to glom on to the theme that younger people simply don't want to go out of their houses unless they look great. There is a ready salesforce for Invisalign, notably the hundreds of thousands of dentists that want to sell new product now that cavities are in decline because of improved hygiene. No wonder the stock is up 165% and remains "cheap" for the momentum investors.
Fourth, the obvious: Amazon (AMZN) . The original A in FANG. Here's a company where valuation hasn't meant that much to begin with and can be justified as a buy simply because the thesis here is that the company is really two companies, a retailer and a web service company. Both on their own may add up to a trillion dollars in value. The company currently has a market value of $543 billion which gives investors plenty of room to buy a lot more stock and not run afoul of that sum-of-the-parts analysis.
Fifth, Apple (AAPL) . When the world's largest company has a stock that sells at 14 times earnings, you can buy it up to 18 times earnings without a real stretch in valuation. The Apple one-two punch of the eight and the ten give you a justification for continuing to buy even up 46% for the year. Why shouldn't it be up 55-60%?
Sixth, is one I don't know about much at all, Arista Networks (ANET) , which is a company that offers cloud networking solutions, which is about as hot an area as you can get. Arista connects companies to the data centers -- it's a rival of Cisco CSCO and it is run by Jayshree Ullal, late of Cisco. The company's shares are up 149% and it seems unstoppable.
Seventh is Boeing (BA) . Aircraft are in secular growth mode. The demand is off the charts and as long as the middle class continues to grow around the world the queue will remain long. These are halcyon times for aircraft makers -- I am not worried about competitor Airbus because there are plenty orders to go around. The shares have appreciated some 70% and yet, can be justified to be bought much higher, a requisite scenario for anointed buys.
Coming in eighth is Home Depot (HD) . I know the stock is ONLY up 27% but after that last quarter I think it can go much higher now that it has taken out its old high.
Ninth is Lam Research (LRCX) . This semiconductor equipment company just keeps putting up fabulous numbers and hasn't been rewarded nearly as much as it should given it sells at 14 times earnings. That's nuts. How can this company's stock be this cheap? Because people are so used to the semiconductor cycle blowing up. But if there is a huge secular growth shift in demand then people will pay for more for this stock and I think that's what's going on. It's up 100% and it can go up much more.
3M's (MMM) stock may be the ultimate blue chip this year. Our tenth anointed one is loved and up 30% but there's a lot of green field space to run in here. 3M put on such good numbers last quarter that I think big time portfolio managers will be embarrassed NOT to own the stock.
You can't have an 'anointed' list without including number eleven, Nvidia (NVDA) , the semiconductor company with the best offerings in data center, gaming and autonomous driving, the three hottest sectors in the technology panoply. That's an amazing triple play and given that many of the institutions buying the stock are not sensitive to near-term valuations then any price can be justified. Sky's the limit. Nvidia is run by Jensen Huang who is a true genius and is competitive as all get out. Where this one stops, nobody knows.
Number twelve is Paypal (PYPL) and this one is so on fire I don't even know if it can be kept below $100. It's currently at $76. The payments processing segment is the hottest sector in finance and Paypal has outpaced everyone in the segment except our next anointed name, Square (SQ) .
The amazing thing about Paypal is that it was supposed to have many companies kill it, from Visa (V) and Mastercard to Wells Fargo (WFC) and JP Morgan (JPM) . They are partners. They can't afford not to be because Paypal is the millennial's credit card. It's up 93% which just makes it more attractive.
Thirteenth? Square. I thought this payment processor might be running out of gas after soaring 232%. Now I am thinking it isn't because of the Bitcoin initiative. People are desperate to find a bitcoin play and Square by default is the play. Now, I thought that it would falter when CFO Sarah Friar threw cold water on the idea that Square should be considered a way to invest in Bitcoin. But then CEO Jack Dorsey comes out and says it's a real thesis and one that is investible. That's all it takes to get something going again.
Fourteen, VMWare (VMW) offers virtualization solutions for the data center and the cloud. The stock's up 57% but it, like Adobe, is regarded as a pure play on cloud adoption and that's one of the most important theme in tech right now.
Finally, number fifteen, there's Walmart (WMT) . I know it was downgraded today by Goldman Sachs but the truth is that Walmart is the only company that can challenge Amazon over the long term and that means it's going to be a must own which isn't bad for a stock that's up 40% but still has a 22 price -to-earnings multiple. Goldman says the stock's ahead of itself. That's perfect. All of these stocks are technically ahead of themselves but that's precisely what gets them on the list.
I don't necessarily want to pay these prices. I want these stocks lower. But the point of this exercise is to recognize that's probably not going to happen. If they do get hit, though, you have my blessing to buy right into the end of the year, just like all the rest of the hot portfolio managers are trying to do.
