Yes, we all know that when it comes to investing, the rule is to buy low and sell high. But for a fast score in trading, often the key is to buy high and sell higher.
Just because a stock has doubled or even tripled in a short period of time (and maybe looks ridiculously overpriced, too) doesn’t mean it can’t keep going higher — especially in the short-term.
November through January is historically the strongest three-month stretch for stocks. The taper is off the table and risk is back on. At this point, barring a bad-news surprise, plenty of stocks with loads of momentum look ready to rally through to year’s end.
No, you wouldn’t construct a long-term value portfolio this way. But sometimes hot stocks are hot stocks — fundamentals or valuation be damned.
Here are three stocks that have doubled, tripled and even quintupled for the year-to-date — and could close out the year with even more gains.
YTD Performance: +114%
LinkedIn (LNKD) has become the dominant social destination for business, with a more than 225 million acquired users around the world. That gives it a wide moat, meaning investors can have some confidence that it won’t go the way of Friendster or MySpace.
Shares have more than doubled for the year-to-date, but then, LinkedIn hasn’t exactly been short of bullish catalysts. The company keeps beating Wall Street estimates — usually by a wide margin — and it recently lowered its sign-up age to 18, which should help bring even more users into the fold.
Technicals also point to more upside in the short term. LNKD trades well above its 50- and 200-day moving averages, and scores a 9 out of 10 on price momentum — a proprietary formula that takes into account a stock’s relative strength and seasonality — according to Thomson Reuters Stock Reports.
Netflix
YTD Performance: +240%
True, as we noted recently, the last time Netflix (NFLX) stock went on this kind of tear, it crashed and burned in an epic meltdown. But that doesn’t mean NFLX has flown too close to the sun just yet.
For one thing, Netflix is dominant in its industry, profitable — and growing rapidly. Wall Street expects earnings per share to quintuple this year — to $1.49 from 29 cents a year ago. EPS is projected to more than double in 2014.
NFLX also has technicals on its side, scoring a 10 out of 10 for price momentum, according to Thomson Reuters Stock Reports.
Tesla Motors
YTD Performance: +440%
Shares in Elon Musk’s revolutionary electric car company Tesla Motors (TSLA) have gone parabolic lately, putting the hurt on short sellers, many of whom have yet to be squeezed out.
With more than a third of the float sold short, short covering could continue to fuel the TSLA rally for some time. And, of course, there’s the allure of a great “story” stock, a visionary CEO and the effect of folks chasing returns on TSLA also helping out.
Lastly, the technicals are bullish. Tesla scores a 10 out of 10 for price momentum, according to Thomson Reuters Stock Reports data.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
