Google: A Buy on Any Further Pullback

| About: Alphabet Inc. (GOOG)

Google (NASDAQ:GOOG) stock is being hammered on three concerns. The first concern is that Google is losing share in the number of organic searches it does. The second concern is that Google is spending too much money. The third concern is that the CEO is untested.

Regarding market share and the number of searches, the gurus of Wall Street and their followers have missed the point. The number of searches is a meaningless statistic. What really counts are the dollars generated from the searches. When viewed in terms of dollars generated from the searches, Google is gaining market share.

Google does not break out the statistics, but support for Google increasing share of the search dollars is easily deciphered from the latest data released by Comscore. Comscore provides data on explicit core searches. Explicit core searches exclude contextually driven searches that do not reflect specific user intent to interact with the search results. According to Comscore, 16.9 billion explicit core searches were conducted in March. Google conducted 11.1 billion of these searches.

On the conference call, Google stated that paid clicks were up 18% vs. the consensus of 15%. Cost per click was up 8% vs. 6% consensus.

Big money is made by taking the other side of the trade when the gurus are wrong. This may turn out to be the case here.

Concerns about Google spending too much money are hard to understand. I do not condone Google spending money on initiatives that have nothing to do with its business such as solar farms. In a perverse way, this is positive for the stock. Sooner or later, the markets will force the hand of Google’s management to stop spending money on non-core activities. This represents a future positive catalyst for the stock.

What is Google getting from this increase spending? On the conference call, Google provided an example – 350,000 Android phones are being activated each day vs. 300,000 each day in January.

I have never done anything of the scope of Google. I have founded or have been instrumental in the founding of over 50 mostly technology related ventures. As I reflect on the experiences of transitioning a company from a super growth phase to a mature phase, in my view, heavy spending on solidifying existing services and innovative new services is essential. Google is on the right track. What do Google’s detractors want Google to do? Should Google not spend money to counter threats from Facebook and wide adoption of apps? Google is on to several excellent initiatives. A good example is illustrated in my resent article titled: A Great Google Idea Leads to Investor Insanity .

Considering the threats Google faces, Google needs to flatten the organization, reduce the number of initiatives, increase innovation, and bring the passion for a great user experience back. I cannot think of a better way to accomplish these objectives than bringing one of the founders as the CEO.

The key to the success of any investment is the timing of the entry. Investors who agree with me should use a proven methodology such as the ZYX Change Method to execute entry at the proper price and time. At present, only three of the six screens of the ZYX Change Method are supportive of a long position. As the stock goes lower, probability of all six screens becoming supportive are high.

On any further pull back, Google stock is a buy.

Disclosure: I intend to buy Google when all six screens of the ZYX Change Method are satisfied.