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I am currently working as a financial analyst for an insurance compagny in Canada. I made an MBA in Canada and I have a CGA accounting charter as well as my FRM and I will soon get my CFA charter. I read on average one financial or economic book per month in my quest to understand everything... More
  • High growth stock bubble 0 comments
    Nov 20, 2010 2:22 PM | about stocks: CMG, CROX, LVS, OPEN, SIRI
    What CMG, CROX, LVS, OPEN and SIRI have in common? They all are stories of fast growth.

    One year stock movements (Graph from google finance)
     

    Some of them have taken a pause during the recession but they are all on the move again. With all of them having very high valuation with PE of around 30 to more than 100. Most of them are forecasted to grow very fast in the next few years but I think the valuation is not taking into account the risk that the competition could harm them. 

    I think we can call this a bubble since these stocks have a very high correlation while they move up very fast and they have no reason to be so correlated. CMG, CROX, LVS, OPEN and SIRI are all from different sectors and they all move as if they were in the same sector and they were similar compagnies... In fact, I selected these stocks randomly from a list of popular stocks we often hear about in the financial news and blogs. These stocks could continue to move with momentum but when the music ends, it could end in tears for the investors owning this kind of stocks.


    Disclosure: Short LVS
    Stocks: CMG, CROX, LVS, OPEN, SIRI
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