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Friday, August 19, 2005
Google is cheaper than it looks
Many investors look at the price of Google and freak out. This was happening even as they launched their IPO one year ago. The truth of the matter is, no matter how you measure the stock's valuation, it is very cheap compared to other stocks in similar businesses.
For some reason, they chose to keep the selling price of the stock high. They could have printed 10 times more stock, and the stock would now be trading at $28 a share, and I doubt anyone would be scared of the stock at that level.
For whatever reason, they decided to do it this way. But don't let the high sticker price keep you away. Instead of buying 100 shares, how about buying 10 shares?
Sooner or later the stock will be added to the S&P 500, and when that happens, even the fund managers who didn't want to have anything to do with the stock are going to have to plug their noses and buy the stock anyway. And when they do, you can bet there will be a stampede.
These fund managers are being left behind as tech stocks slowly become the best bet on the street again. Some of these managers lost so much on tech the last time tech rallied and collapsed, they can't buy tech stocks again unless they are forced to.
Google gets 99% of its revenue from the advertising sector, and the lead that Google enjoys in both the regular search as well as the pay-per-click advertising that it does on those search results, means it will be next to impossible to unseat.
MSM and Yahoo are hot on the trail, but with a secondary offering expected to add 4 billion dollars to the Google warchest, I would put my money on the leader.
I would buy Google anywhere here between $250 and $300, the next time it goes above $300 I think it is heading for $400.
Trade carefully,
The Rogue Trader
Important disclaimer: The publishers, editors and authors of this newsletter and associated website, TheRogueTrader.com, are not financial advisors, and do not recommend the purchase of any stock or advise on the suitability of any trade or investment. The information in this newsletter and on the associated website is provided for educational and entertainment purposes only. Stock trading and investing can cause loss of capital, and you should always consult with a professional financial advisor before trading or investing.
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