The penchant among some investors for the racier side of the market reflects the lacklustre nature of the US economy in recent years. Against the backdrop of less than compelling broad activity, investors have bet big on companies that are growing quickly or, in the case of biotechs, possibly on the cusp of being transformed by developing a cutting-edge drug.
"The market is interested in companies that can grow independently of the economy and they are willing to pay higher multiples for those," says Robert Stimpson at Oak Associates.
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After a notable swoon a few months ago, many of these so-called momentum stocks have rebounded as economic data have been mixed and underlying volatility loitered near a record low, helping propel the broad S&P 500 into uncharted territory.
The Nasdaq biotech index, for example, has risen more than 20 per cent from its April low, while Netflix has rebounded more than 30 per cent from its early May nadir, with Gilead Sciences, Twitter, LinkedIn, Facebook, Amazon and Tesla also recovering in the region of 25 per cent since the spring sell-off.
Such a performance has caught the attention of the Federal Reserve, which warned earlier this month that valuation metrics for smaller firms in the social media and biotechnology industries "do appear substantially stretched" despite a notable downturn in equity prices for such firms early in the year.
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Steve Weeple, senior investment director at Standard Life Investments, says the Fed has raised an important point about the rise in valuations of small companies in social media and biotech; namely the importance of being a diligent stock picker.
"When the success of strong companies filters down to smaller companies in the sector that have not yet delivered, investors need to be wary," says Mr Weeple.