This is a very interesting post IMO, but from the point of trading psychology. I can spot several patterns of blurred thinking I made myself about 6 years ago. Let's see:
Quote from keyser1:
I'm long & overweight (about 30% of portfolio) on google and here's why --
O.K., you're overweight. In other words, you made a, matter of fact, risky decision. And we humans just hate the possibility to have made a wrong decision, now don't we? One way to solve this so-called cognitive dissonance is by justifying it to others. You basically build your own reality consisting of "yeah"-sayers. That's how the internet bubble fueled and refueled itself. Let's move on.
I think conservatively google will be valued at 360 in febuary 06 (after end of year earnings are announced). I think at the absolutely min, it'll be a 250 stock, and it can potentially top 700+ (although I wouldn't bet on that, like I said I see 360 being a conservative estimate)
Plenty of presuppositions here. I honestly believe you that you're convinced of what you wrote. This is called self-hypnosis (I'm serious).
So why do I like google (as a company) --
Like? LIKE? You mean like, it'd be a problem to sell it with a loss for you if the scenario above (i.e. your subjective future reality) didn't come true?
Hell, during the bubble, plenty of guys wrote and spoke about companies they "liked". You should like a woman's pu**y, or some style of food, whatever, anything but a stock you're trading in!
--They have the best search algorithm around. When they first developed it it blew away the competition. I haven't kept up with search/database industry research but I would guess that they've improved it since developing the idea.
--They hire the best people in the industry (the software industry has alot of brilliant people around and google hires the best)
--Pretty much every major product they've developed (search engine, mapping software, web mail) is better than anyone else's. This is a trend I see continuing.
--They seem to have a quality over quantity culture. You don't see them clogging up their website with subpar features. They're taking their time in becoming a one-stop portal.
--Online advertising is expecting to grow at high rates over the next decade.
--They're able to come up with new ideas on how to generate revenue (eg. quest to become an ad-broker so to speak).
--"google" is now a verb ("I googled ___." ) Thats gotta have some value. I even heard a radio host say "I googled ___. I went to yahoo and --" So even though he yahoo'd it, he thought that google'd = searched. Being a verb/noun (tivo, q-tip, rollerblade) can't hurt.
I'm not too much into fundamental analysis anymore (although I hold a business degree), but the above are all nonsensical justifications. Don't get me wrong, no insult here: I am absolutely sure that you're convinced of what you're writing.
Why do I like the stock (other reasons) --
--Relative to its peers, institutions are underweight in google. That leaves a decent room for increased demand. Also the inevitable S&P factor (I wouldn't want to be short this stock the day S&P is announced).
--Its blew by earnings in the past, and I expect it to do the same in the future. It gives no earnings guidance so plenty of upside potential (also added downside potential but I think most analysts are likely to be conservative when they're completely guessing).
Most analysts are most likely to do what most other analysts do. Or, they get an order to write an analysis that comes to a conclusion that is in one way or the other beneficial to the company. Remember, an analyst's salary also has to be paid for...
What I don't like about the stock --
I think recent run-up has been too quick. Would've preferred a more gradual build up (although I made big money on goog options when it went from 220 to 260 so I shouldn't complain too much in addition to the unrealized gain on my stock).
Somehow, I think that there are plenty of other retail investors out there who think the same. Have you also already made plans about what to do with your current and your future paper gains?
Bottom line is: I think from now until late 2006 goog is going to be a real bull (late 2006 new windows comes out with integrated web search capabilities..the only thing that I can see as having potential to eat away from goog's user base). I'm still deciding on whether to play the long-call options game with goog though cuz compared to other company's options, goog's seem signicant overpriced.
"Never confuse ingenuity with a bull market"
Second bottom line: Although I would love a trend reversal and to see this stock go back down to 230 (with no fundamental difference). If this were to happen, I would double down on margin.
Once again, you imagined a scenario that has already become part of your subjective future reality. Just like with so many others out there: "If it rose for such a long time, there's no reason for it not to rise further."
Like I said, my reply is not intended as an insult. But since I've been through pretty much the exact same around 6 years ago, and since I've made pretty much the exact same mistakes I accuse you of, I am very sure that you'll dismiss me as a moron, or someone who wasn't as bright as you when you went long. IOW, I'm a loser, because I fail to understand that this is a new economy google is part of. An economy where old-fashioned ideas such as "business models" or "P/E ratio" don't mean much.
And by the way: google currently has more than twice the market capitalization apple has.
