With all the major domestic indices — Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — having posted record-breaking sessions, the cries of a potential bubble in the markets will surely grow all the more louder.
But with Nasdaq stocks finally making the critical breakthrough, should investors be even more leery of a bubble bursting?
As with most debates concerning the markets, the jury is split. Some analysts point to a declining rate of momentum in Nasdaq stocks overall — despite the monetary influx of the U.S. Federal Reserve — as evidence of an eventual collapsing of a bubble.
The counterargument is that fundamentally, the internet bubble of the late 1990s and the current record-breaking point values for Nasdaq stocks are different. Back then, it was not unusual for a technology company to pop up 400 or 500% in value in its initial public offering. Today’s investors are far more savvy and are attuned to essential gauges of a market opportunity, such as earnings performance.
But in order to fully understand what the markets will yield, an analysis of individual companies would be an essential necessity.
Let’s look at the top three Nasdaq stocks and see which has what it takes to rise above the bubble:
3 Top Nasdaq Stocks Looking to Rise Above the Bubble: Netflix (NFLX)
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The price target increase reflected NFLX stock’s aggressive strategy to penetrate international markets, but would it be enough to overcome equally tenacious competition?
Technically, it’s rather easy to see why Oppenheimer upped the ante on NFLX stock. Between November 2012 and February 2014, NFLX stock skyrocketed up the markets, gaining more than 480% in value. As with any hot name among Nasdaq stocks, Netflix fell into a year-long consolidation range as the bulls and bears waged battle for control.
The critical point, however, is not that NFLX stock consolidated — all stocks, no matter how fundamentally sound, will eventually hit a corrective phase. What investors are looking for is the response after the consolidation, and with NFLX stock, the numbers do all the talking. After finally breaking out of the volatile range, NFLX stock stands currently at just under $680, about 66% above the average price of the consolidation period.
With such a strong response, any bearish investors have been put on warning: don’t stand in front of this freight train!
3 Top Nasdaq Stocks Looking to Rise Above the Bubble: Amazon.com (AMZN)
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The focus of intense government hearings and an issue that provokes the ire of constitutional freedom proponents, drones will nonetheless receive legal regulation — within a period of one year — by the Federal Aviation Administration for commercial purposes.
Immediately after the FAA announcement last week, Amazon responded that it stands ready to introduce its drone delivery system as soon as the ink dries.
Investment returns have been buoyed by AMZN stock’s positive and diverse fundamentals. When not busy dictating terms in the consumer retail sphere, Amazon is also a major competitor to NFLX stock’s market share in internet television, including original content offerings.
This has contributed to a strong year-to-date performance of 43% for AMZN stock — currently second among top-ranking Nasdaq stocks — but can the company keep up its rapid-fire pace?
Based on AMZN stock’s past history, the answer is a resounding yes. Shares convincingly beat out its consolidation period that took place between April 2014 until the end of the year. At its current market price, AMZN stock is also 10% above its prior peak in December 2013.
The one technical concern for AMZN stock is that momentum has bled off substantially over the past 60 days, with month-over-month performances for May and June so far averaging 1.5% versus the huge 13% swing for April. While not decisively bearish, it does suggest that investors are lacking confidence that AMZN stock can continue to yield the strong returns of prior months.
Overall, AMZN stock is a solid investment, but it may lack the stamina to go the rest of the distance.
3 Top Nasdaq Stocks Looking to Rise Above the Bubble: Avago Technologies (AVGO)
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But with popularity come the pitfalls, a lesson Avago’s management apparently knows all too well. Insider activity has been running wild recently, with AVGO stock’s chief operating officer Bryan Ingram dumping 60,219 shares on June 18 being the latest example.
Should retail investors likewise take a hint and jettison AVGO stock?
It’s never a comforting sign when a corporation’s own executives are trimming their vested interest while front-facing the typical song and dance routine to the public. In just this month alone, 286,953 shares of AVGO stock have been chucked into the open market by insiders, giving us a clue into the sentiment regarding a company that trades at a price-to-earnings ratio of 56.
If anything, AVGO stock’s insiders have certainly picked a most auspicious time to release their holdings, which was just after May’s incredible 27% jump over the prior month. The ensuing insider activity has created a pattern similar to an “inside day” on AVGO stock’s monthly candlestick chart.
Essentially, the trading activity for June is mostly inside AVGO stock’s high and low range in May. This signifies uncertainty or hesitation among market participants about which direction Avago shares will go. Although the runup in AVGO stock is technically very strong and suggests a statistical likelihood that shares will charge higher still, common sense trumps the chartists’ arguments.
If the organization’s leaders don’t feel comfortable holding AVGO stock at current valuations, there’s no reason why anyone else should either.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
