Momentum stocks slammed—Is the bottom near?

Published Tue, Feb 9 20166:00 AM ESTUpdated Tue, Feb 9 20168:07 AM EST

The sell-off in momentum stocks is accelerating to the downside. Is it time to buy or is there more pain ahead? The Nasdaq 100 , which is a good proxy for momentum as the index includes high fliers in the Internet and biotech sectors, is down more than 7 percent this month and has fallen nearly 14 percent for the year. Moreover, the four FANG stocks are on average down more than 17 percent this year versus the S & P 500 , which has fallen about 10 percent. FANG is an acronym created by CNBC's Jim Cramer for a basket of high-growth technology stocks — Facebook , Amazon.com , Netflix and Alphabet (formerly known as Google). Even billionaire Mark Cuban is de-risking his Netflix investment during this downdraft. He said Friday that he bought put options to hedge against his entire stake in the streaming video company. Here is what Wall Street's top analysts and traders believe about the near-term prospects for momentum stocks. Source: FactSet If we look at the performance of the Nasdaq 100 index, the double-digit pullback this year isn't out of the ordinary. The index had drawdowns of more than 10 percent last summer, twice in 2012, and once in both 2011 and 2010. On all those occasions the stocks rallied back to new highs. The latest crush is the worst since 2010 and many on Wall Street say these stocks are broken and won't find the bottom anytime soon. "We recommend that investors, while maintaining exposure to cycle-consistent styles, favor stocks with more reasonable valuations and reduce exposure to expensive momentum stocks," JPMorgan strategist Dubravko Lakos-Bujas wrote in a note to clients Monday. And the commentary on the FANG stocks isn't any better. Read More No. 1 analyst on Wall Street: Buy this stock "I think FANG underperformance is part of the correction process," BMO's Jack Ablin said in an email. "Valuation is finally catching up with these high fliers. We're not buying yet." The Nasdaq 100's P/E ratio fell from more than 21 times at the high to 18 times Monday, according to FactSet. And the recent multiple contraction in the market is especially bad for FANG. "What most don't realize is that if multiples contract on growth names they must also contract on all other names since the market is a relative pricing mechanism," Stuart Frankel & Co.'s Steve Grasso said in an email. "The bottom line is if you think there isn't going to be any growth anywhere, why pay the premium on the FANG names, if they aren't giving you anything in return?" However, there are some buyers in this market. Interestingly, it is the short sellers who are using this drop to cover their shorts and buy select equities. "It's been a very good two month ride on (the) FANGs (short), but time to take in large profits of about 30 percent return," BGC's Steve Cortes wrote in a Monday email to clients. Cortes told CNBC Pro he believes the bearishness on the names has become consensus, but he doesn't still like them as longs because global growth is still "too challenged." "Only buy stocks that you are willing to buy lower. That is the lesson. I am happy (with the drop)," said Andrew Left, founder of Citron Research, said Friday. "There are great companies that I couldn't own for years because of their price, and now I finally have a chance to be an investor. LinkedIn is one of them." CNBC Pro confirmed from Left that he started a long position in LinkedIn on Friday. Read More Trade: Chesapeake woes may hit these stocks

The FANG stocks: Facebook, Amazon, Netflix and Google

Adam Jeffery | CNBC

The sell-off in momentum stocks is accelerating to the downside. Is it time to buy or is there more pain ahead?

The Nasdaq 100, which is a good proxy for momentum as the index includes high fliers in the Internet and biotech sectors, is down more than 7 percent this month and has fallen nearly 14 percent for the year.

Moreover, the four FANG stocks are on average down more than 17 percent this year versus the , which has fallen about 10 percent. FANG is an acronym created by CNBC's Jim Cramer for a basket of high-growth technology stocks — Facebook, Amazon.com, Netflix and Alphabet (formerly known as Google).

Even billionaire Mark Cuban is de-risking his Netflix investment during this downdraft. He said Friday that he bought put options to hedge against his entire stake in the streaming video company.

Here is what Wall Street's top analysts and traders believe about the near-term prospects for momentum stocks.