Portfolio managers are struggling with what to pay for companies if they want to add value and beat the S&P 500.
Take Beyond Meat (BYND) . It is losing money. It's hurt by the lack of food service business. And yet its stock is going nuts. What's going on? How can it be so strong?
It's got reasons, but they are reasons that don't fly with most portfolio managers. First, it's being viewed as a zeitgeist stock. Right now the Tysons of the world are doing things that are repulsive not just to vegetarians but to anyone. Who wants to eat something that's been handled by someone who has Covid. How long does Covid last on meat or chicken or pork? Is it like cardboard? Or is it like a metal shelf. We don't know.
So go plant-based meat. And go buy the stock of Beyond Meat. Amazingly, CEO Ethan Brown is taking advantage of the disarray at Tyson (TSN) and is CUTTING prices, incurring even more losses. But that shows amazing confidence that people will like the taste.
Now there are some portfolio managers who might be thinking maybe the stock's going up because there's a deal in the works with Starbucks (SBUX) to expand beyond its current joint venture in China. Or maybe it's because some are betting on an expanded version of its trial with McDonald's (MCD) in Canada.
I think I know the real reason. This is a favorite of the Robinhood crowd, the 10 million strong younger investors that are thinking about the future, and I think the future's never been brighter for plant-based meat and never been darker for the old fashioned kind.
No matter unless they are vegan I bet most portfolio managers were left behind on this one because they don't want subjective parameters, they want something hard and fast like they are used to.
Beyond Meat doesn't give you that.
Beyond Meat is the Tesla (TSLA) of the food group. Of course Tesla's a darling of the Young Investors, and it almost seems like a rite de passage if you are going to own stocks. Why not? Sure he is quirky. He calls out his stock as being too expensive. Yes he's hot-tempered: rather than negotiate with the Alameda County official who deemed his factory closed, he let off a twitter storm that probably set him back.
I know there are analysts who show that he will have a big profit next year. I don't believe it. I think you value the stock on the amount of market cap the other auto companies lost because, well, that's about the only way to justify it other than to say it's a really cool stock attached to a really cool car that you might own.
What matters is it's a winner.
Same thing goes for Shopify (SHOP) . The reason it can go up 68 straight points after actually selling stock is that we all know it is the antidote for brick and mortar stores that are deemed non-essential, and for cooped up quarantined people to get creative. Etsy (ETSY) and Wix (WIX) are very similar. These stocks will not be valued by traditional metrics. They, too, are valued by the amount of retail market cap they have displaced.
Unlike so many other investors my age I do not begrudge any of these choices. Why? Because they are disruptive. Because they are run by brilliant people. Because they could be the next Netflix (NFLX) or Amazon (AMZN) .
To me that's enough.
You don't need another reason to own them and own them I would do if I were a young investor as long as you are building up a wider portfolio and not making this stock your only one.
(Starbucks and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
