Google stock up

[xoxoxoBruce]

Originally Posted by glatt

I like Google. I "value" the company. But I sure don't understand how the market determines the price. Yeah, I know. The market is what someone is willing to pay. But look at the numbers.

Google reports that for each share, there was a $1.29 profit for the last quarter. Good news. Better than expected. Wall Street expected a $.78 profit. That's $.51 more per share than was expected. The stock should go up a bit as a result. I would expect the stock to go up $.51 per share plus there would be a little bounce because people might think that since Google was surprisingly profitable this quarter it will always be that way. But the stock has gone up about $30-40 in the week since the news was announced. How do you get $30-40 out of $.51?? Google would have to keep up that profit for 80 quarters, or 20 years to justify that increase in share price. Google is good. But it's not that good.

Obviously, everyone on Wall Street disagrees with me, because the price is what it is.

I don't get it.

I remember reading in Barrons, a long time ago, there is(or was) an accepted formula for determining the stocks value. From that you could buy undervalued and avoid overvalued stocks. Except when your cousins, mistresses, bookies, shoe shine boy had an inside tip, of course.

[xoxoxoBruce]

Originally Posted by Beestie

Ebay, on the other hand, has a product - an intangible product but a product. And they have loyalty from their users. There's no "splitting up" the online auction business but if someone puts up a better search engine, two-thirds of google's users would be gone by the end of that week.

I hear a lot of "I hate Ebay(and paypal) but what choice do I have". If another auction becomes generally available, I can see a lot of people only going to Ebay after they've checked elsewhere first. Then if I want to sell a DoDad(shudder) and there's a thousand on Ebay, I'd put it up on the Avis(#2) auction hoping to catch them before they "resorted" to Ebay.

The people that have money in Google are also users. If they're happy users they will keep the faith and loyalty. Every site and especially search engines has quirks and shortcuts you learn with use. People will stay where they feel comfortable if they can. So I can't see a mass desertion until somebody comes along that's MUCH better. That said, I am an old fart and Google is nothing short of an act of god in my eyes.

[smoothmoniker]

Originally Posted by xoxoxoBruce

I remember reading in Barrons, a long time ago, there is(or was) an accepted formula for determining the stocks value.

This sort of thing worked much better a generation ago when most investing was done by institutional managers who controlled large accounts and made decisions based on P/E ratios, and other new-fangled fancy math stuff. Today, the shift has moved toward alot of people with 10k in an e*trade account making their own trading decisions, and they're not being at all reasonable or sophisticated about it. In that type of scenario, public sentiment about your company is a real factor.

There's a phenominal book called "Mean Markets and Lizard Brains: How to Profit from the New Science of Irrationality" by Terry Burnham. It analyzes how animal instinct (pattern recognition, fear of failure, fight or flight response) influences mass market decisions.

-ml

[xoxoxoBruce]

Originally Posted by breakingnews

But yes, GOOG is no different than Microsoft, Netscrap, AOL - companies that worked on getting people *to* the Internet. Google is just showing people how to *use* the Internet. It's building the foundation for ways we can *live* the Internet. What we don't know is if Google will be the one to do that in the long run, when the world is a massive interconnected fiber-optic orgy.

I got a PC when I was about 55 and I own about 26 linear ft of bookshelves that have books just for reference material. To be able to find information, I could never remember, without leaving the house. The PC was fun and usefull if I had the address I needed but everytime I used a search engine it would keep trying to take me some place I didn't want to go. It seemed the whole purpose of the engine was to determine what I wanted to BUY. Google didn't show me *how* to use the internet, it gave me the ability to use the internet. Of course the bigger the net gets the more I need it. I might even start divesting some reference books...but not on Ebay.

[Beestie]

Originally Posted by xoxoxoBruce

I remember reading in Barrons, a long time ago, there is(or was) an accepted formula for determining the stocks value.

Those principles are as valid today as they were then. The economics of what a company is worth are as fundamental as geometry. The old equations allow one to "plug in" things like asset value and growth potential but before the computer revolution, those two variables could usually be quantified with reasonable precision. Today, however, the variability in how those two things are measured is exponentially greater.

We can both look at all the assets on General Motors balance sheet and decide what we think they are worth and our answers would probably be pretty close. Try it with Google's assets and the answers would probably be very different as will our answers on the future revenue Google can squeeze out of those assets.

[lookout123]

what you are talking about is generally termed "fundamental investing".

fundamental investing - look at the company, you are considering for purchase. look at the books, the products, the management, the competition, catalyst for improvement, etc. make investment decisions based on assessed value of company and expectation of future earnings. usually associated with a measured "buy and hold" investment philosophy. believe in long term capital appreciation combined with a strong dividend focus will outperform other methodologies in the long run.

technical investing - look at a stock. consider the stock's action in relation to the market, to it's peers, to the economic cycle. look for patterns and catalysts to make the stock price move. make investment decisions based on charts, graphs, and trends. usually associated with active traders who believe they can capture capital gains and avoid losses by properly interpreting the charts.

[BigV]

Google scores another coup: Google hires Net pioneer Vint Cerf

I heard this guy's pretty smart. I bet their stock goes up again.

[tw]

Originally Posted by xoxoxoBruce

Google didn't show me *how* to use the internet, it gave me the ability to use the internet. Of course the bigger the net gets the more I need it.

Back when the Cellar was only a BBS, numerous Cellar Dwellers got invites into Philly to discuss the future of the internet. We all sat in a room with a long conference table. At the end wall was a one way glass. They recorded what we said.

I remember my last summary point. There was so much information out there. The one thing we desperately needed was a tool to find all that information. Now all I had to do is build a search engine. Saw but did not act. Even I did not believe a search engine could be this profitable. I only saw it as something desperately required.

Don't remember who else from the Cellar participated. Also don’t remember who organized the discussion or what happened as a result.

[tw]

Originally Posted by Beestie

We can both look at all the assets on General Motors balance sheet and decide what we think they are worth and our answers would probably be pretty close.

Many previous analysts have concluded that GM was worth more broken up into parts. However GM was structured to make a breakup too impractical - too difficult. Its rather weird to think breaking up a company makes it more profitable. However Carl Icahn tried it and backed off quickly after learning these details. The numbers suggested it would be profitable. Once he got into the details, those numbers no longer made sense.