Perhaps new investors don't care about valuations. Perhaps a new exchange-traded fund could take Wall Street by storm. Perhaps insiders are in no hurry to sell. Perhaps the returns will be much better than we think. Perhaps some part of the market mechanism has broken down. Or perhaps the market as a whole has new expectations for stocks. And stocks have lived up to those expectations, and may even be meeting those expectations. I am by no means saying that there is too much money being made in the market. I also hate being scolded, so I keep using this word. But when a stock price goes straight up, then goes up, then goes up some more, you have to wonder if something has really changed. I would like to talk about Applovin for a moment. Applovin is a profitable company that connects businesses and users (1.4 billion of them) on a variety of platforms. Use generative artificial intelligence to improve ad performance. If I had to design a company that best describes everything that's going on in the advertising industry right now, it would be this one. Perhaps that's why it's up over 900% in a year. Perhaps that's why the company is now a roughly $140 billion company. APP YTD Mountain Applovin YTD There was some insider selling, but nothing huge. Chief legal officer Victoria Valenzuela just sold 17,925 shares for $6.3 million, according to a regulatory filing. But Mr. Valenzuela controlled another 405,000 shares. Aprovin director Mary Georgiadis sold $10 million in stock in the last week of November. However, Georgiadis still owns 154,500 shares through the partnership and 35,000 directly. Hardly a dump. Another director, Dawson Alyssa Harvey, sold 3,000 shares for a profit of $977,000. However, she still owns 7,359 shares. There were other big selling items as well. Andrew Cullum, vice president of products, sold 5.8 million shares but still owns 13.1 million. This is by no means a sale. Because if this was from 2000 to 2002, these positions would have been wiped out. At the time, insiders were selling at incredibly high prices. But it wasn't as fast as the corporates. Companies like Aprovin would have been dumping inventory from shelf to shelf to pay the bills. But Applovin doesn't need that. Profits growth is accelerating. A truly remarkable company. What's driving the stock's rise is that each time the stock reaches a new level, analysts continue to raise their price targets on the stock. It's a virtual circle. Oh, one thing that certainly doesn't matter is the ratings. It sells for 120 times current earnings and 98 times future earnings. There is no need to worry about such evaluations. Applovin is an enterprise software company and no longer needs a foundation to build a reputation. What about the piece de resistance here? A year ago, the company was valued at $13 billion. With its newfound market capitalization, the company is ripe for addition to the S&P 500. The stock had been under intense bidding for most of last week, with reckless bets that it would be added after Friday's close. It wasn't. Therefore, after Friday's nearly 4% decline, a decline is likely on Monday morning. But no one knows for how long. As I search around for clues to what's really going on in this market, I find that I always keep coming back to one thing, and one thing only. That means there is no supply. Despite hitting record highs, there is so much resistance from companies to going public that new companies are not supplying the stock. It's difficult and annoying. The stock market is of little importance as there are many other opportunities to raise funds, such as private equity and venture capital firms looking to enter. This is not a way to raise money, it's just another way that the Securities and Exchange Commission has no intention of moving to a more cautious investor, beware buyer approach. Literally, the SEC needs to start celebrating things quickly without much scrutiny and telling people they need to be wary of all stocks. Just doing that and looking for outright lies might be enough. Of course, I like the SEC more patriarchal and strict than that. But I wanted a strict SEC on all cryptocurrencies except Bitcoin and Ether. In my view, at the end of Gary Gensler's tenure as SEC chairman, he was far out of step with America. It's strange to feel anxious about not having enough inventory. But valuations have become less meaningful to most of the market, so only new supply can bring this market down. If your S&P 500 has a P/E ratio of about 28 times, one turn short of its pre-1987 crash level, no new big sellers emerge from the public sector, and you don't see it as attractive to private companies. I really don't know what to say. As it stands, lower interest rates will make stocks even more attractive, leading to more money flowing through index funds and sucking up all the little newly available supply. Oh, and just in case you think a deluge is about to happen anyway, given that the incoming administration of President-elect Donald Trump doesn't, by all accounts, a new wave of mergers and acquisitions is about to happen. Please remember that there are. He is as anti-merger as President Joe Biden. I say this out loud because no other administration has been so averse to takeovers. Last week, I talked at length about Animal Spirits and how stock prices often rise due to ever-greater price-to-earnings ratios for the same earnings. These multiple developments may explain much of what has been happening recently. By doing so, you get the S&P 500 with a very high P/E ratio. Of course, you can point out the excesses. According to the VIX, there is a sense of satisfaction and it is very low. VIX stands for CBOE Volatility Index, which is Wall Street's so-called fear gauge. The spread between junk bonds, high-quality bonds, and Treasuries is very small, indicating that risk is not being properly assessed. There doesn't seem to be any worry like that often associated with war or the uncertainty overseas. When I get the missing part, I'm not too worried. Self-satisfied again? Or maybe you just understand that, at least in this market, if you sell on these shortfalls, you'll almost always regret it. To that, I say I won't become a wolf boy. I will be the boy who follows the S&P 500 Short Range Oscillator, a trading momentum indicator that I have relied on for decades. It has been steadily declining, breaking out of overbought territory for the past five sessions on Friday. Oscillators are by no means oversold. Therefore, you don't buy stocks until the price drops. But I'm seriously furious at myself for being held captive by tool maker Stanley Black & Decker, life sciences company Danaher, electronics retailer Best Buy, and Mexican beer company Constellation Brands. . This market only likes winners. There is no room for companies that import from China, such as Best Buy or Stanley Black & Decker. There is no room for Constellation, a company that imports from Mexico. As a marginal company operating in China, Danaher has no room for inroads. But the good news is that the club has a ton of other stocks in its portfolio that don't share those liabilities. As long as I do that, I can accept the loser position. But what I do know is that these four represent value, and the worst thing you can say about a stock, especially when it comes to tariffs, is that it represents value. I'm not optimistic. I'm not unhappy. We are perplexed because we have always been taught that the laws of human nature cannot be overridden and that people will always be greedy and always fearful. But there is little fear. And strangely enough, judging by the desire of insiders to hold on to their shares, there is very little greed. Because they must really believe that their stocks will go up. Because if we didn't, this would never happen. And yes, here I am, in my 42 years of investing, nothing like this has ever happened. Will it last? Oh, stop it. This situation has been going on for a very long time, and all the traders you hear on the air have exited this market multiple times, so I don't think it's worth listening to their judgment. No. They are the losers, not the “simpletons” who buy stocks and hold on to them. Who is the winner? A person who believes in stocks of companies that have unlimited growth or have the potential for unlimited growth in the future. You may judge them harshly. I judge them rightly. (Jim Cramer's Charitable Trust is long SWK, DHR, BBY, STZ. See the complete list of stocks here or as a subscriber to Jim Cramer's CNBC Investment Club, before Jim makes a trade Receive trade alerts Jim waits 45 minutes after sending a trade alert before buying or selling stocks in the charitable trust's portfolio. Publish a trade alert if Jim talks about stocks on CNBC TV. from 72 Wait for the time and execute the transaction. The above investment club information is subject to our Terms of Use and Privacy Policy, as well as our disclaimer. No fiduciary duty or obligation exists or arises as a result of this, and no specific results or benefits are guaranteed.
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Perhaps new investors don't care about valuations. Perhaps a new ETF could take Wall Street by storm. Perhaps insiders are in no hurry to sell. Perhaps the returns will be much better than we think. Perhaps some part of the market mechanism has broken down. Or perhaps the market as a whole has new expectations for stocks. And stocks have lived up to those expectations, and may even be meeting those expectations.
