Why not call a spade a spade here and say that what Wall Street pumps the astute short seller should bet against before and during the ensuing dump. Such a strategy worked well this year in shares of OPEN, TZOO, NFLX, IWM and many others. Here are the 4 pumps that I'm looking to short before the next dump.
Salesforce.com (NYSE:CRM) -- Jim Cramer was back in front of Salesforce again on Friday, but the sad truth is at 650X earnings the stock is a good short here in our view and simply not an interesting speculation from a long perspective as the shares simply carry to much risk at such an astronomical valuation. In our view there simply is no way to talk yourself into a bullish view of CRM given the current state of the financial statements. That said, the company has exhibited stellar long term growth and is very well managed. CRM is a tough stock to bet against, but longer term the risks for the stock are quite high.
Amazon.com (NASDAQ:AMZN) -- Amazon is trading for 110X earnings. While the company does have a ton of top line growth, we think the coming sales tax issues will hurt its value add and that brick and mortar mom and pop stores (you know places people used to go to buy things before Amazon.com was around) may actually make a bit of a comeback. With such a high P/E ratio and such a dismal future if California somehow collects its 9% off the top sales tax from Amazon.com, this name should be selling for half of its current price tag according to our analysis, but of course our analysis could be completely wrong.
LinkedIn (NYSE:LNKD) -- LinkedIn like Amazon is a ground shaking, world changing business model but we think that the current valuation is simply too rich for the company's longer term business prospects and future free cash flows. Yahoo has around 10X the web hits as LinkedIn yet the company is only worth twice as much as LNKD at current prices. In addition, LinkedIn is growing but its growth comes from an extraordinarily low base compared to profitable enterprises so shareholders have to take a look at the math before jumping right in to LNKD at 400X earnings.
Dunkin' Brands (NASDAQ:DNKN) -- Dunkin makes a great cup of coffee and a I am a huge fan of the business, but the stock is looking overvalued here. With a price to earnings ratio over 30X it's pretty interesting to see the coffee stocks trading at richer multiples than high technology growth stocks and I doubt the trend has permanent legs. That said, I do think the coffee business is a great business and that DNKN deserves a 20X multiple just not a 35X multiple.