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The 'fab five' stocks for 2014 — and why they matter

Philip Pearlman
Philip Pearlman
The Exchange
The Netflix sign on is shown on an iPad in Encinitas, California, in this file photo from April 19, 2013. Netflix Inc reported higher profit for the fourth quarter as the company added 2.3 million customers to its TV and movie streaming service in the United States. REUTERS/Mike Blake/Files (UNITED STATES - Tags: BUSINESS SCIENCE TECHNOLOGY ENTERTAINMENT)

Every bull market has its iconic leaders the stocks that seem like they're carrying the market on their backs with their relentless strength while also encapsulating the major societal themes of the broader advance.

Back in the 1990's it was companies like Microsoft (MSFT), Intel (INTC) and Cisco Systems (CSCO), as they equipped computers and networks. In the mid 2000's, it was Apple (AAPL) and the emergence of the smart-gadget revolution.

Today, five companies are notable in that all of them had huge years last year, are younger than 20 years old, have market caps over $20 billion and are leveraging technology to offer products and services that make our lives better.

Today's fab five

During the present bull market, these fab five stocks stand out for their performance and because they capture the zeitgeist of improved living. And they are all large-cap leaders that scorched 2013.

You simply must be attending to them no matter what type of stocks you invest in or what approach you take to measuring the state of equities, because they are going to inform you about the health of the broader market.

They are especially important, because every time we get even a minor correction in the major averages, pundits come out of the woodwork predicting doom. Better to ignore the doomsayers and keep your eye on the price action of these fabulous five names:

1. Google

Google (GOOG) rose 58% last year and now has a $400B market cap, just ahead of Exxon (XOM) and behind only Apple Inc. Despite its size, it has remained aggressive in its acquisitions. It also appears to have a plan to grow revenues, in addition to its cash-cow search business, through the organization of massive amounts of information, automation, mobile, smart devices and artificial intelligence. Google is the consummate player in innovation and the captain of the fab five.

2. Facebook

Facebook (FB) has a close to a $170 billion market cap and gained just over 100% for 2013. In the age of social media, Facebook is the preeminent name, leaving LinkedIn (LNKD) and Twitter (TWTR) behind.  Zuckerberg took a botched IPO in May of 2012 and a company that was behind the mobile curve and brilliantly turned it all around by making great deals like stealing Instagram and monetizing the heck out of mobile. Even as the company gets criticized for losing the kids, it somehow continues to leverage its massive size and even to grow engagement and revenues. 

3. Tesla

Tesla (TSLA) has a $24 billion market cap and gained over 300% in 2013. It represents an ideal the world aspires to, where green is sexy.

This has been an emerging theme since 2008, when crude oil skyrocketed to $148/barrel and the need for alternative energy sources became apparent. The Tesla mystique reads that maybe you can have it all - great style and performance with a declining carbon footprint. Meanwhile, CEO Elon Musk is really making it happen by building a stellar high-performance automobile that runs cheaply with less pollution.

There are so many reasons why Tesla shouldn't wouldn't and couldn't work but Musk ignores all of them and pulls the whole world along with him.

4. Priceline

Priceline (PCLN) gained 46% in 2013 and sports a market cap of $65 billion. It may be the quietest of the group, while it continues to execute flawlessly and broaden its service set.

It is the oldest company of the bunch, a survivor of the dot com bust, and in many ways represents the enduring promise of those times. Simply, it makes travel more convenient and cheaper for its users while managing to avoid getting disrupted by newer entrants such as AirBnB.

5. Netflix

Netflix (NFLX) gained 295% in 2013 and has a market cap of $26 billion. It is changing the way we consume video and disrupting how we consume entertainment media. It's still incredibly early in the transition from bloated cable contracts to steaming à la carte, as evidenced by today's news of Comcast (CMCSA) taking Time Warner Cable (TWC). But Netflix thrives amid the old guard, even as it challenges them.


All-time highs, FTW!

All the fab five stocks were leaders in 2013 and mightily outperformed in a year in which the S&P 500 rose almost 30%. All of them made all-time highs earlier this week and are making them again on Thursday.

While the idea that as long as the leaders thrive, the advance continues might be a heuristic only, as these fabulous five names outperform, the bull market must be given the benefit of the doubt.

If they falter, well, then watch out.