I didn’t really want to talk about Google in fact in my earlier posts I have mentioned that they were overpriced at 450 or something like that. But, now that the stock is not doing so well and all the naysayer are hounding the fort; I feel the urge to set the record straight.
I can understand people who feel: that the stock is overpriced at P/E of 70 or so; that there are better opportunities to be had at that price; that Google does not have, but a single source of revenue stream whose growth rate is suspect; that the stock is very risky and prone to fluctuations; or that the competition from Microsoft, Amazon and Yahoo may spoil the party. To them I don’t have much to say, these are all valid concerns – pick your cards and place your bets.
These guys (fuckedgoogle.com, speaking_of_trouble) on the other hand are a lot more fun and I would like to respond to them rationally knowing full well the result. As they say “Talk sense to a fool and he calls you foolish” – just that and it would be too polite; I really hope for a lot more.
Let me first address the argument that you have nothing to gain by owning Google stock because they don’t distribute dividends. There are income stocks (that distribute dividends) and then there are growth stocks, these are companies that see a higher ROI by investing their revenues back into the business. It is an efficient and well recognized model and the stock price grows with growing revenues thus providing a payback to the investor. The other doomsday argument seems to be that Google execs are selling their stocks thus signaling a sinking boat. Well, I prefer the management of the company I invest in to be smart, and they would be downright morons not to sell anything at this point, they have to lower their stakes in Google, its their payday, let them have it. As many analysts have pointed out these sales are not out of proportion (certain amount of stock options do get liquidated specially in a bull market), moreover some of them were declared more than a year earlier. But this rational speak is boring me, let me give you the reason for my chutzpah.
I trust technology, people and their attitude. The rest is all floss. Google has the best internet delivery infrastructure which so far has been exploited just for search but with the right vision could do lot more. Google management has the right vision in trying “to *organize* the knowledge of the world” and the right attitude towards fostering innovation. It’s a geek fest, have fun and maybe we will make some money. I buy that and will stand the tide.
<rant> Btw, if you think I am crazy … you are in good company, it’s a widely held perception amongst people who know me. And just as you would expect from a crazy !@#$!@#$ – I don’t give a damn. </rant>