I began a position in Google earlier this week when it dipped under $525 and added to it this morning under $500. If it drops another 5%, I’ll buy more. It’s not as cheap as I typically like to see when buying stock in a new company but relatively speaking it’s one of the cheaper stocks right now in this market. I believe having exposure to technology is very important in a portfolio as our dependence on it as a society grows. It’s also hard to argue with Google’s long-term sustainability and innovation as they branch-out into so many areas (often my biggest concern with tech companies). They’ve been spending a lot on new developments and international expansion the past few quarters but I think we’ll start to see that slow moving forward, creating additional free cash flow. And I wouldn’t be surprised to see them begin returning it in the form of share repurchases with the stock underperforming over the past year. My one caveat has always been their employee compensation structure of awarding stock which dilutes the share count each year. Not exactly investor friendly but I suppose that’s their cost for retaining happy, committed employees, which is very important.
We had the good fortune of buying more this morning after an analyst at Stifel downgraded the stock. Thank you for the opportunity! While this analyst isn’t saying to sell Google (he just doesn’t see a near-term catalyst), I find it amusing that analysts almost always downgrade after stocks fall and upgrade after stocks rise. I have very specific criteria I look for in growth stocks and some of the reasons he sites for the downgrade are the exact reasons I’m starting to like Google. I think he’s confusing the story of Google as a company with the stock itself, which are often two different things – funny how Wall Street so often focuses on the wrong things.
Google – 1 year (daily)
Google – 3 years (weekly)
Looks like a nice long-term entry to me. However, we could see it retrace all the way to the 440-460 range, which I would welcome as another opportunity to buy more.
I hope everyone is off to a great start in 2015. As always, thanks for follwing!
-Nick
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