I got a kick out of the Barron's cover and story. Perhaps I found humor because I no longer have skin in this game. For anyone new, I bought Google almost across the board for clients on Aug 1, 2005 at $288 and sold it in late October at $345. I was pleased with the trade but clearly sold it too early.I wanted to avoid what was has been happening to the stock over the last few weeks. In general terms, stocks that go up a lot in faddish way run the risk of dropping hard. It is possible the drop from $450 is an over reaction but if that is so, then you have to be open to the idea that the move up to $450 was too much as well.
The article does some valuation work in which they create an "unscientific" price model of $188 per share. They try to address click fraud. I am not expert enough in the issue to know how big a problem it is or how much the problem is priced into existing ad rates. I think the nature of this problem is not really known yet, nor is the magnitude of the potential consequence. I would, however, ahem, invite you to click liberally on any and all ads on this site.
The article further delves into options expensing. I find this issue to be minimally important. As a matter of my interpretation of precedent, options expensing is the type of thing that the market can price in without much dislocation most of the time.
I would encourage anyone to read the article. It is free after all.
3 comments:
It certainly is amazing how quickly Google has fallen -- I think the fear has overtaken greed at this point and is likely to reverse eventually, given what I think are excellent prospects for Google to continue to grow, but it's definitely true that you have to take the downs with the ups.
I didn't see anything new in the Barron's article ... but it's still pretty impressive what sway Barron's has over the market.
I wrote up my thoughts on this over at my site, too -- I'm willing to let my investment ride at this point given my long term optimism on the company.
I like the redesign, by the way -- though the absinthe ad gave me the heebie jeebies.
Cheers,
Travis
http://oneguysinvestments.com
Roger,
I read your blog - good info.
Google - Two angles I never seen written about Google or Internet ad market and are absolutly true as I've 20 years Internet expereince having been there from the start.
1. Large percentage of "Targeted Internet Ads" are actually "Sales Leads" - this is an important differnce as "Sales Leads" are only paid for when they are hard to get - ie. a booming market.
2. Large percentage of Google's (and other firms) Internet Sales Leads are from the massive Real Estate and Mortgage Sales Leads Business.
So if you are short real estate, you should be short Google as well. The is a connection.
True - most people investing in Google have no idea what they are investing in but are simply riding the stock as a "tech stock" with a hot brand.
great comments both.
Barron's Sway? I'd say so.
People riding the wave? Makes sense to me.
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