“Cool Kid” Stocks

I totally agree with David Einhorn’s assessment that we are witnessing “our second tech bubble in 15 years.” I agree mainly because of how nuanced his analysis is – he’s not calling the whole market a bubble or even the entire tech sector – he’s speaking about a select group of popular momentum names that had been deified over the course of 2013 but are now starting to look shakier.

From the Greenlight Capital Q1 investor letter:

Screen Shot 2014-04-23 at 9.48.22 AM

 

David’s right. But if you’re not riding these highfliers in a race against your fellow investors for short-term gain supremacy, you don’t have much reason for concern, in my opinion. It’s probably¬†their problem, not yours.

Most large cap tech stocks are selling at market multiples or below. But there are several large and mid-cap tech stocks (mostly tech and biotech) trading as though the laws of physics and finance simply do not apply. I talked about the new bubbles in January of this year – they are everywhere – but there is not a wholesale participation in them across the nation. Only hedge funds and the very wealthy seem to be playing along this time. Which means they will be less societally painful as they pop or deflate.

Hopefully.

 

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