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Friday,
April 17, 2009
(Cont'd from
above)...
Jim (cont'd):
The reason that
we look at the
markets history,
and examine our
successes and
failures… is not
so that I can
beat myself
bloody with a
cat of nine
tails…
excoriating
myself from my
mistakes… and
then praising
myself for
everything that
I have gotten
right… it is so
that you can
learn from our
past winners and
losers… and in
my entire career
as an investor
and a
professional
investing guru…
I do not think
that I have ever
seen another
winner like
Google… the
early Google…
some stocks are
key to markets…
the 80’s,
Pfizer… 90’s,
Yahoo… that is
Google, they are
a key… and as
long as those
stocks remain
key… I think
they will
continue to go
higher and take
the market with
them… these
stocks are the
generals, the
leaders… they
give investors a
reason to feel
bullish.
If you want to
understand what
makes a stock a
leader… what the
anatomy of a
stock market
general is… then
you really do
not have to look
any further than
Google… between
when it became
public on August
19, 2004 and
when it peaked
at the end of
2007... oh I was
on board the
Google band
wagon from the
very beginning…
see I
understood… I
understood that
Google had what
every money
manager wanted…
it had growth…
and growth is
like crack to
people who make
the decisions at
the mutual
funds… most with
a growth bias…
and with the
hedge funds, the
ones that
command so much
money and swing
it around… they
cannot stay away
from growth.
I said I wanted
you to get in on
Google’s IPO…
didn’t care
where it came…
came at $85... I
said to keep
buying at
$200... at
$300... at
$400... even at
$500... even as
most numerous
analysts and
procrastinators
thought that it
was too
expensive…
either because
the share price
was simply too
high for them to
fathom… or
because they
thought it was
pricey based on
future earnings…
but like every
stock market
general,
Google’s
earnings grew
far faster than
most investors
realized… that
is how you get a
stock to really
fly… that means
that there were
lots and lots of
people who could
be converted…
either those who
were betting
against Google…
or just sitting
on the
sidelines…
people were
astonished by
its real growth…
they could not
believe it and
they piled into
the stock
sending it ever
higher… the
market loves
growth… and
Google had pure
growth in
spades.
When a stock has
what we call
ARG, accelerated
revenue growth,
and it is
earnings are
growing by more
than 30% a year…
that is the
magic number…
then the sky
really is the
limit… and on
these metrics
even Microsoft
in its hey day
could not
compete with
Google… but at
every turn you
had all of these
extensibly
qualified people
telling you that
it could not go
higher…
appealing to the
conventional
wisdom that any
stock that had
run as much as
Google could not
go higher…
eventually
Google did come
down with the
rest of the
market… it lost
some of its
luster… but that
happened well
after the bears,
people who had
told you to sell
all the way up…
predicted it
would.
Now normally on
this show we
like to buy low
and sell high…
but there are
times when you
find a stock
like Google,
between 2004 and
its peak in
2007... really
your only
choices were to
buy high and
sell higher…
because stocks
with that kind
of growth do not
look back… you
had to believe
in the growth…
and suspend your
disbelieve when
it came to
Google’s
allegedly sky
high seeming
share price… the
fact is that
when it was a
$200 stock, and
a $300 stock,
and a $400
stock… it did
not matter… the
share price did
not matter… even
when it appeared
that Google had
reached nose
bleed heights…
people were put
off by the
expensive
looking stock…
but as I have
said over, and
over, and over
again… if Google
were a $20
stock, or a $30
stock, instead
of a $200 or
$300 one, and it
had the same
price to
earnings
multiple and the
same growth
rate… then you
would have been
buying it hand
over fist…
because believe
me… the only
thing that the
money managers
who were buying
this stock by
the boat load
cared about… was
that growth
rate… and based
on its growth
and its price to
earnings
multiple…
remember the
earnings per
share, E times
the multiple, M
equals the price
of the stock…
Google was
actually a very
cheap stock from
the moment it
was born until
soared above
$650 and then
$700... and
where it peaked
at $740.
▼ ▼
▼ ▼
▼
 The Bottom Line!:
Once the market
started falling
apart in 2008...
everyone realized
that they had to be
worried about an
impeding recession
and a garden variety
depression… well
then obviously
Google then stopped
being key… it
stopped being a
general.. it was
demoted… stripped of
its stars… became
just another mortal
soldier… but that
was after a pretty
spectacular multi
year run.. and if
you obeyed your
discipline and took
profits when you had
them… you could have
made a fortune all
the way up.
[verbatim recap]
[end of segment]
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