Facebook Inc (FB), Tesla Motors Inc (TSLA) And A Bubble About To Burst


A handful of stocks have done incredibly well so far this year. Names like Tesla Motors Inc (NASDAQ:TSLA) and Facebook Inc (NASDAQ:FB) are headliners at just about every media publication. Investors just can’t seem to get enough of them. Even today, Tesla is up another 1 percent, while Facebook has risen 2 percent.

Facebook Inc (FB), Tesla Motors Inc (TSLA) And A Bubble About To Burst

But how high will these stocks go before the bubble bursts? That’s what Barron’s contributor Michael Kahn considers in his recent post.

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Are Tesla, Facebook and others overbought?

As the stock prices of several big companies like Facebook Inc (NASDAQ:FB), Tesla Motors Inc (NASDAQ:TSLA), Netflix, Inc. (NASDAQ:NFLX) and others have tripled in value this year, it certainly appears that they are “wildly overbought,” as Kahn says. The rapid rise in value of these stocks certainly suggests that there’s some sort of buying frenzy going on.

Of course this doesn’t mean that there aren’t some scares. Tesla Motors Inc (NASDAQ:TSLA) marked one scare in August and another back in May. By many accounts, the events which sparked those stock shares should have ended the stock’s rally, but they didn’t, which shows just how high the demand is for this company’s stock.

Facebook Inc (FB), Tesla Motors Inc (TSLA) And A Bubble About To Burst

Charting growth drivers like Tesla and Facebook

At this point there is no one chart anyone can point to in order to track the companies with stocks being driven largely by momentum. The real problem though, according to Kahn, is that so many people are investing in just a few stocks.

“When the crowd piles into these few stocks as it is doing now, the crowd can just as easily decide to get out,” he writes. “And when it does, the danger is that the exit doors may be just a little too narrow for an orderly exodus.”

He notes that for now, these momentum-driven stocks are continuing to do well, but he believes that when “more than just two or three start to crack,” we will see an important advance warning for the rest of the market.

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