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With Google now on the upward momentum train, having broken through the $400 barrier, some perspective would seem to be in order. In this day and age, when some loud analysts talk, most of the nation listens (much to my chagrin). Not that Jim Cramer is untrustworthy -- but when he re-iterated a $500 price target on GOOG shares the other day, he *became* the market maker for GOOG stock, along with many more analysts that have been trumpeting GOOG's target at $500 for quite some time. But who analyzes the analysts, as Sheldon Liber pointed out this week? Not enough people, in my estimation. It seems one variable -- the analyst himself -- can make the market on the stock being "analyzed." Must be nice. This is definitely not The Wisdom of Crowds.
It may be hard to see, but the way in which analysts "project" target stock prices is often the only catalyst for shares to start moving up. This often makes no sense, since nobody can see the future. In fact, having tracked my portfolio for quite some time now, I am 100% confident that had I listened to analyst consensus on every equity I own, I would be over 200% worse off than where I am now. That's proof in the pudding.
Yes, it sure as heck takes a lot more gumption and work to research -- thoroughly -- your own holdings. But that means I can take the hit or hold the celebration based on my own call. I'm in control, not a market-making stock analyst. There are aggregate and numbers-based interpretative formulas that many analyst houses fly on flagpoles these days, but many of them are dead wrong. That tells me the market is largely, well, a crap shoot.
We come to Google, which has a market capitalization that blows my mind. That is telling -- the world is a global marketplace and is interconnected in ways never before seen, thanks to the Internet. For information, Google is the ringleader. But a $500/share ringleader? In the recent few months, Google has placed well-timed and incredibly-lucrative partnerships with companies that stretch the globe, from MySpace.com to Intuit to Dell.
Those are all pretty safe bets for Google in its quest to become the world's largest advertising company (or network, to be more precise). When all these partnerships start showing results, I may revisit my thought that GOOG shares are not worth $500 (if they get there). As for right now, Google still receives almost all revenue from text ads on its market-leading search engine, I'm just not convinced. I use Google products all day long and really admire them -- but I rarely (once a quarter) click on an ad link. I am in the minority here, since Google's entire kingdom rests on those links being clicked -- for now.
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Reader Comments (Page 1 of 1)
9-15-2006 @ 1:11PM
Gary E. Sattler said...
Brian, dear dear Brian,
You sell your readers short.
You can't honestly believe that the investors are so short sighted that they would simply take the commentary of a few well meaning stock reviews and decide where they will plunk down millions of dollars.
It worked like that some decades ago but really, the times have changed.
Today's investors are a savvy lot. Their research tools are many. They trend and history and analyze this stuff to death. They only look to us for confirmation....You do know that?
Even with all the tools and knowledge, sometimes bad choices are made. Sometimes losses are taken. It happens every day. It's part of the game. If no money was ever lost, neither would any be made.
Please Brian, give the Directors more credit.
After all, usually it's OUR money their working with.
Blessings to the Investors.
YOU have grown America.
Gary E. Sattler
9-15-2006 @ 1:12PM
Gary E. Sattler said...
Oh, by the way,
Watch for a stock split by Google.
Don't say I didn't tell you.
(but I could be wrong!)
Gary
9-15-2006 @ 2:38PM
Brian said...
Hi Gary,
Thanks for your comments. I wish my experience was not that way, but I have personally witnessed the "one analyst says this, so it must be true" scenario -- and millions of dollars ride on those words. Not saying it happens every time, but it does, even today. YMMV in your experience, of course.
"Today's investors are a savvy lot" is something I have to take issue with. Many investors are savvy, but "today's investor's"? I won't jump to blanket statement all investors, but holy cow, do I see boneheaded moves everyday with "Today's investors". Some are savvy, many are not.
But, I do agree with you that bad choices can be made regardless, and money is made and lost every single day. After all, the reason someone sells is another person's reason to buy. Someone is 50% right and someone 50% wrong -- eek!. Oops, I forgot shorters and all other market things that happen every minute -- darn. :-)