12 dog stocks that burst the bubble argument

It's easy to refute the bubble talk. Just look at these 12 stocks that deserve to be down—and are, by a lot.

Now that the Nasdaq has retaken the 5,000 mark, talk will increase about the market being in a bubble. The way I see it, investors are actually acting quite rational.

Notwithstanding the unprecedented Federal Reserve Bank intervention and corporate financial engineering, like stock buybacks, the free market is exhibiting a selection process similar to Darwin's survival of the fittest.

Richard Heathcote | Getty Images

I can hear the howls from some corners of the investing public. They're voicing common but true-as-ever refrains:

  • The bull market (6 years running) is getting long in the tooth.
  • The "Shiller CAPE" P/E ratio is scary high.
  • Deflation abounds.
  • Trading partner economies (China and Europe, in particular) are weakening.
  • The Fed is getting set to end its six-year zero-interest-rate policy.
  • Insider selling has picked up in 2015.
  • And (as I noted) the Nasdaq 5000 level means we're in a bubble.

There are other weak links I can point to, and no doubt people will do so in the comments section below. But hey, I can only squeeze in so much in 700 words, so please humor me here for a little longer.

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Investors are culling the herd—rewarding companies with good results by sending their stocks higher and punishing companies with disappointing results by pushing their shares lower. This is about as clear as an act of rationality as you'll ever find in the stock market. Throughout my 25 years of experience in the securities industry, if the stock market was in a bubble, the stocks of companies that disappoint investors wouldn't have been hit so hard. To me the fact that they are exiting these stocks signals that investors are doing the rational job of separating the good from the bad.

I can make my anti-bubble case in 12 dog stocks (as of their closing prices on Monday, March 2).

Introducing the dogs of the now

Hot growth stocks and how much they're down from 52-week highs:

Widely held stocks and how much they're down from 52-week highs:

Recent IPOs and how much they're down from 52-week highs:

Count 'em up—that makes 12.

Don't get me wrong. I am not making any kind of call on these stocks, and any one of them could make a big comeback. But I hope you see my point. If stocks were really and truly in a bubble, we'd expect a much greater amount of forgiveness on the part of investors. But instead, investors are being discerning in their choice of stocks to buy.

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I can certainly point out a few examples of companies whose stocks are at record highs; after all, the S&P 500and Dow Jones Industrial averages are at new highs, and the Nasdaq has reached its 15-year-old high. So who is pleasing investors with good corporate results? I'd say that these are among the most talked about. Apple. Visa. Under Armour.

Corrections and bear markets always have a place in markets, so investors have to build those assumptions into an investment strategy. And a swift 20 percent correction in stocks may get the bubble-paranoid crowd out in full force—it will test investor confidence for sure. But with so many investors already trigger happy and selling disappointing stocks, I believe excess valuations to a large extent will have already been wrung out.

So move along, folks. No bubble to see here.

By Mitch Goldberg, president of ClientFirst Strategy, a Dix Hills, New York-based investment firm.

Follow Mitch at @Mitch_Goldberg