Wednesday, July 20, 2005
Time to short Google?
Another lackluster day, as my portfolio gained only $30, once again underperforming the major indices.
My philosophy on investing is that the only certainly is that there is no certainty. No matter how good a stock looks, it can always go down (and often will), and no matter how bad a stock looks, it can always go up (and often does). The best that one can do is try to trade stocks where the balance of probabilities are in your favor. That way, as long as you have a diversified portfolio, you will make money on average.
With that in mind, I shorted 50 shares of Google at $315.50 today after the market closed. Actually, I shorted Google last year and lost $6,000. But that was then, and this is now. My intuition tells me that Google will disappoint when it announces earnings tomorrow. Don't get me wrong: I fully expect Google to beat the analysts' consensus. I just think that there is a high probability that the company will not beat the consensus by a wide enough margin. The last two earnings reports have been blowouts. Investors are expecting another.
I have read in a number of places that the stellar growth in the prices that advertisers are paying for search words has leveled off, and may be declining. Yahoo already disappointed, in part because revenue from contextual searches did not grow as quickly as expected. While this may be because Google was successful in taking market share, I think the more sensible explanation is that the overall market is not growing as quickly as many in the industry had hoped.
My philosophy on investing is that the only certainly is that there is no certainty. No matter how good a stock looks, it can always go down (and often will), and no matter how bad a stock looks, it can always go up (and often does). The best that one can do is try to trade stocks where the balance of probabilities are in your favor. That way, as long as you have a diversified portfolio, you will make money on average.
With that in mind, I shorted 50 shares of Google at $315.50 today after the market closed. Actually, I shorted Google last year and lost $6,000. But that was then, and this is now. My intuition tells me that Google will disappoint when it announces earnings tomorrow. Don't get me wrong: I fully expect Google to beat the analysts' consensus. I just think that there is a high probability that the company will not beat the consensus by a wide enough margin. The last two earnings reports have been blowouts. Investors are expecting another.
I have read in a number of places that the stellar growth in the prices that advertisers are paying for search words has leveled off, and may be declining. Yahoo already disappointed, in part because revenue from contextual searches did not grow as quickly as expected. While this may be because Google was successful in taking market share, I think the more sensible explanation is that the overall market is not growing as quickly as many in the industry had hoped.
# posted by Stockcoach @ 7:42 PM 
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Stockcoach, you are a wiser man that I, but I would really advise against it.
I too believe that Google is currently overpriced, but even with a mediocre earnings report don't expect investors to come to their senses. Google's long term prospects are staggering; it's the biggest advertising company in the world with a monopoly in the fastest growing technology in the world. You stand to lose a lot of money here, but make only a modest amount.
It's only a matter of time before Google is going heads-up against Microsoft in the operating system race. At the very least, put a stop-loss in at $325.
I too believe that Google is currently overpriced, but even with a mediocre earnings report don't expect investors to come to their senses. Google's long term prospects are staggering; it's the biggest advertising company in the world with a monopoly in the fastest growing technology in the world. You stand to lose a lot of money here, but make only a modest amount.
It's only a matter of time before Google is going heads-up against Microsoft in the operating system race. At the very least, put a stop-loss in at $325.
# posted by 
: 9:06 PM, July 20, 2005
: 9:06 PM, July 20, 2005
As I work in the interactive sales arena, I can confirm the "leveling off" of pricing.
There's still alot of tremendous upside in online ad pricing, but there are also considerable amounts of inventory. This is creating a depressing effect on ad pricing. For the time being.
Shorting Google is probably a good short term game.
There's still alot of tremendous upside in online ad pricing, but there are also considerable amounts of inventory. This is creating a depressing effect on ad pricing. For the time being.
Shorting Google is probably a good short term game.
# posted by : 6:26 PM, July 21, 2005
: 6:26 PM, July 21, 2005
So many blogs and only 10 numbers to rate them. I'll have to give you a 9 because you have a quailty topic.
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