by John Dorfman, Dorfman Value Investments.
The stock market ran in circles this year and is little changed as the year’s final days tick down. But there were some mighty gainers and desolate losers.
Here are five of the year’s star performers and five of the goats.
The winners …
Among the 500 stocks in the Standard & Poor’s 500 Index (SPY), Netflix Inc. (NFLX) — up 144 percent —was the best gainer through Friday. The company has been ingenious in conveniently delivering TV shows and movies to the public, allowing people to binge-watch or nibble on any timetable they want.
I admire the company. I loathe the stock.
Why? Because it sells for multiples of intrinsic value for which no stock should ever sell. Netflix shares command 457 times earnings, eight times revenue and 24 times book value (corporate net worth per share). I consider those ratios insane, dangerous and bloated (respectively). I am considering selling the stock short, betting on a decline.
Amazon.com Inc. (AMZN) is the second-best gainer, up 106 percent. At 917 times earnings, 3.1 times revenue and 25 times book value, Amazon shares are in orbit, much like Netflix’s shares. Though the stock is immensely popular, I think it’s imprudent to hold at a price of near $640 a share.
More reasonably priced is the year’s third-best gainer, Activision Blizzard Inc. (ATVI). This maker of video games has had big hits with its Call of Duty, Starcraft and Warcraft series. The stock is up 84.7 percent this year and sells for 25 times earnings. That’s more than I would pay, but it’s a multiple that a reasonable growth investor might accept.
In fourth place, up 62 percent, is NVIDIA Corp. (NVDA), a semiconductor chip maker. It is well positioned in chips used in cloud applications, but the stock seems fully priced at 30 times earnings.
Coming in fifth among the 500 stocks in S&P’s well-known index is Total Systems Services Inc. (TSS), up 58.2 percent. The company, based in Columbus, Ga., is a leader in electronic payment processing, especially for banks. The stock, which had a big rise this year, fetches 27 times recent earnings and 20 times analysts’ projected earnings for 2016. Again, I wouldn’t pay it, but a reasonable person might.
Leave A Comment