A colleague recently commented to me “look at all the great stuff that Google is doing - that company is a great buy and you’d be foolish not to get in on it”. Admittedly my colleague is a smart guy, but he doesn’t have any unique insights into Google’s business, and certainly doesn’t have any inside information. So what basis does he have for thinking that this stock is a great buy? Will the company continue to deliver great financial results? Quite possibly – but here’s the point: that expectation is almost certainly already fully reflected in the stock price! In fact if you look at the fundamentals of the company, the current stock price already reflects some incredibly aggressive assumptions about how the overall market for online advertising will grow, about Google’s ability to continue to grow its market share, make money from new lines of business and continue to increase profitability.
Possible? Sure - Google is well positioned and has built a great management team and brand.
Liklely? Likely enough to bet a large amount of money on? Well that is a different question altogether!
I’m the first to admit that I like to keep ~ 2% of my portfolio available for “fun” bets on individual stocks (yes - I own some Google shares), but I keep the bulk of my money in Index Funds. At the end of the day, I know that is the surest way to long-term financial success.
technorati tags:investing,stock picking,google