Not All Returns Are Created Equal
Google's strong performance since its initial public offering in August 2004 has confounded many observers (one skeptic was bearish on the stock even before it went public) and offers a reminder on how difficult it is to be an active manager who can exploit these so-called "bubbles" in stock prices. Even the brightest minds in the investment world sometimes (and often do) get it wrong.
$85 (IPO)
August 2004
"I find the Google phenomenon fascinating from a psychological perspective because it proves once again how totally irrational investors really are."
Paul B. Farrell, "Google IPO Brings 'Irrational Investors' Out in Droves," Investors.com, May 19, 2004.
$165
December 2004
"For all its impressive technology and verve, Google, as noted earlier, has no clear competitive advantage. That may explain why - as was true during the late, great dot-com bubble - many insiders are rushing for the exits. Three top executives said in SEC filings at the end of November that they had sold blocks of stock worth millions of dollars."
Fred Vogelstein, "Google: Is This Company Worth $165 a Share?" Fortune, December 13, 2004.
$403.45
November 2005
"All the optimism, however, like the dot-com craze of the late 1990s, is likely coming at the expense of future returns for current holders of Google shares."
Ian McDonald and Scott Patterson, "Google at $400; Is It on Merit Or Just a Mania?" Wall Street Journal, November 18, 2005.
$401.78
February 2006
"Google's results didn't come close to matching the outsize expectations for earnings and revenue bandied about in the days leading up to Tuesday's report."
Gregory Zuckerman, "Investors Take a Slap at Google," Wall Street Journal, February 2, 2006.
$509.65
November 2006
"Geoffrey A. Moore, a Silicon Valley marketing consultant and author of several books on investing in technology stocks, argues that investors' fascination with Google will inevitably wear off and its shares plummet like so many highfliers before it."
Saul Hansell, "A $500 Milestone for Google Believers," New York Times, November 22, 2006.
$508.55
July 2007
"Investors wanted less spending, more growth. . . . Investors punished the stock in late trading, sending shares down 7.3%, or $40.04, to $508.55."
Jefferson Graham, "Google Misses Forecasts, and Street's Not Happy," USA Today, July 20, 2007.
$625.85
November 2007
"Google shows every sign of remaining one of the healthiest companies in history. It will not likely see any big fall in its fortunes."
David Kirkpatrick, "So Google's Down? That Means BUY,” Fortune, November 16, 2007
"We view search as a natural monopoly business and expect Google to continue to gain share until it has effectively reached 100% share."
Heath P. Terry, CFA, "GOOG: Building Advertising's Operating System," November 20, 2007
"While GOOG shares have already had a great run, management continues to position the company to address increasingly larger end-markets... with the potential growth that this adds to GOOG's prospects, we are raising our rating to Buy from Hold with a 12-month price target of $985, up from $500 previously."
David M. Garrity, CFA, "Rating Now Buy As Asset-lite Mobile Approach Selected," October 31, 2007
Question: Which analyst or money manager will be the best predictor of Google's performance in 2008?
Answer: Who knows? There is no reliable method for investors to identify analysts or fund managers who can consistently pick stocks that will outperform the overall market. This task becomes virtually impossible with a very volatile stock such as Google, whose risk level is more than four times greater than that of the S&P 500. What we do know, however, is that capital markets work and reward investors who structure well diversified, global portfolios across a variety of asset classes and remain disciplined to their investment strategy in both good and bad markets.
