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Netflix, Biotech, Alphabet, Facebook, and Microsoft- Now What?

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Netflix, Biotech, Alphabet, Facebook, and Microsoft- Now What?

What’s the saying, easy come, easy go? Despite all the mayhem, the S&P 500 is still up by nearly 3.5 percent so far in 2017. Amazon is up almost 23 percent, Netflix is up about 40 percent, Alphabet is up about 6 percent, and Facebook is up about 8 percent.

Mott Capital Management, Michael Kramer

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Too Far, Too Fast

Those are some pretty healthy gains, for only a few weeks of the year. Meanwhile, earnings for all the company’s mentioned were solid; the stocks are just guilty of rising too far too fast, while investor expectations got well ahead of themselves.

It was Monday, January 29, that I noted that Alphabet, Amazon, and Microsoft were all at well-overbought levels, while Apple was struggling. Well, the stocks came back to earth by the end of this week, and that is good.

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Valuations

Believe it or not, Alphabet only trades at 23 times 2019 forward earnings estimate of $49.09. Meanwhile, Facebook trades at just 22 times 2019 estimates of $8.93, while Microsoft sits at 23.50 times estimates of $3.93. These are not expensive for the type of growth they offer investors, and likely means that unless we get a total collapse in their earnings power, it isn’t likely they fall too far.

Netflix

The one stock that was most impressive all week was Netflix, which was only down 2.5 percent, better than the S&P 500 nearly 4 percent decline, especially given the stocks massive start to the year.

Most amazing is that Netflix finished Friday higher by nearly 90 bps, despite the S&P 500 falling over 2 percent. Like I mentioned earlier in the week, it almost feels like the buyers are using any weakness in the market to soak all the liquidity that comes their way.

netflix

We need to continue to watch how Netflix trades over the coming days. Because once the market stabilizes, Netflix may be on its way much higher.

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Biotech Stocks

The biotech stock also held up reasonably well in the madness of Friday’s trading, with the IBB falling by only 1.6 percent. Despite the ETF falling below support at $113, which proved not to be nearly as strong as I had thought, its uptrend is still in place. We will not want to see the IBB break $111, or we are looking at a fall back towards $106.

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Michael Kramer of Mott Capital own shares of GOOGL an NFLX

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