The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

23 April 2007

Syncategorema, or the sum of its parts

Okay, so for 3 years now, and in my clearest pronouncements ever, I pounded the table for you to purchase Google/GOOG shares. And, okay, you ignored my recommendations to purchase the investment because you had reasons you perceived trumped my arguments to own the investment.

Meanwhile, Google the company continues to make all the right moves. Oh, sure, you can dis the GooTube move, the recent DoubleClick purchase, the outrageous capex, etc but the fact remains: Google is a juggernaut. Both the company and its stock are vastly undervalued, under-appreciated, and with substantially more and better times ahead. Consider, for example, Henry Blodget's most recent comments:

"One of Google's earliest self-conceptions has certainly been borne out: It's no ordinary company. Ordinary companies just don't grow this way. In fact, it's probably safe to say that no company has ever grown so big and so dominant so fast (If anyone knows of one, do tell). In Year 8, Google is about to smash through the $14 billion revenue-run-rate barrier. Annualized free cash flow has now cleared $2.5 billion..."
Or consider Bill Miller's comments from a recent Kiplinger's interview:
"'There is no company in the market that we can find with a faster top-line growth rate, a higher profit margin, a dominant position like Google enjoys but with a lower price-earnings multiple,'" said Miller, in an interview with Kiplinger's April 19. Miller notes that Google has a lower P/E ratio (26, based on the $18.92 per share analysts expect the company to earn in 2008) than Starbucks (SBUX) but is growing twice as fast as the ubiquitous coffee company. He puts it in a league with Wal-Mart (WMT), Microsoft (MSFT), Cisco Systems (CSCO) and Dell Computer (DELL) at the start of their meteoric stock-price ascents. Those companies also sported lofty P/E ratios, but Miller says they were cheap in relation to their future successes."
Gosh, this all begins to sound like a broken record. (Does Bill read The Deipnosophist? :-) Remember this, however: price is risk, as I often say, but never value!

All that said, if not as investor, then how about you as Google consumer? Steve Rubel at Micro Persuasion comments, "... in recent weeks I have started using Gmail as much more than an email host. With its gobs of storage, speed and tremendous search/tagging capabilities, you can transform it into a personal nerve center that's available from any computer or mobile device. When you tap into this power and combine Gmail with some other tools, it is perhaps the most essential site ever developed." (Italics mine - dmg)

all (see Steve's article for the "all") sounds like some good stuff, particularly for someone on the go. Things appear to be moving in the right direction, and this company (Google) continues to add stuff that keeps them (light years) ahead of their competition. One bright idea is the company's mission to 'open things up' via 3rd party plug-ins and APIs; i.e., build a big base, and let others benefit from using its platform, which is a classic strategy in technology. From there, a company could 'eat' its young (buy the new companies with the startling and perhaps disruptive technologies) -- which, admittedly, Google does now, and will do more of in the forseeable future. Soon you will see the various and seemingly inchoate threads form a wondrous tapestry.

All of which means three items, at minimum:
1) Google's lead over its competitors widens;

2) A first wave of technological innovation is soon to crest and wash over us. Prepare to be startled.


3) We (consumers and investors) benefit. Period.
-- David M Gordon / The Deipnosophist


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