Netflix, GoPro, Under Armour, Fitbit, Chipotle, and Amazon are a few of the growth stocks that get more than their share of media attention. And while Chipotle is down heavily on e Coli concerns, the others are all having trouble satisfying investors appetites for obscene growth.
Its a horrible market where many stocks are at or near their 52 week lows. In times like these, all stocks get taken down but growth stocks can get hit especially hard and quickly if their earnings don’t measure up. Since these handful of stocks get so much media air time, what once was an on-air cheerleading section can quickly turn into a daily assault of negativity that can really put doubt into any investor’s mind.
This bull market that had run so long might be in its final stages or completely over. In good times, growth stocks can soar to unbelievable heights as investors seem willing to just keep piling in, no matter what the fundamentals are. When everything is rising, growth stocks can be unstoppable.
But now that market conditions are changing, profit taking becomes the name of the game.
Value stock that were once laughed at by growth stock investors may now cycle into favor. In a volatile and/or falling market, things like dividends, P/E ratios, and actual profits may become more meaningful and desirable to investors. That doesn’t mean that value stocks may go up mind you, but they might do “less badly” than those once upon a time high fliers.
Investors are quick to make decisions and that can mean that popular growth stocks can turn on a dime. You have to be ever vigilant with your high P/E stocks or you might miss or misinterpret the beginning of a long slide down. The trouble with growth stocks is that it is hard to believe that the growth or momentum is really over. Often times a stock can stumble but then regain footing the very next quarter. Facebook is an example of this where the stock price retreated down to about $94 from a high of $110 before announcing earnings that were stellar. A quick two day reversal not only erased all those losses but propelled the stock past that 52 week high.
Growth investors always hope for a Facebook like rebound when their stocks start to decline. But if they don’t get it they need to figure out just how much pain they are willing to take. In many of the stocks listed above, the pain has ben devastating and not selling at a higher price than they are now has been a big mistake.