Google Stock Is Stagnant Due To Law Of Large Numbers

First things first. I have no position and never have in Google (like most tech). I could care less what the stock does. Again, great company and great products and I use them everyday.

Now, am I the only one who could go the next 6 months without reading another Google article or post? Holy Christ, I am seeing 20 a day on the same topic. This stuff is not even original content, just the same news rehashed over and over and over... Enough is enough kids. There is such a thing as overkill and the Google (GOOG) coverage hit that 6 months ago. Google taking search share stopped being news in 2006, I do not need to see it 15 times when they announce it EACH MONTH.

I am waiting for twenty posts tomorrow about what CEO Schmidt ate for breakfast and what color it turned his stool, where I can find the video on Youtube and how this is just another brilliant marketing ploy. Once again, Google originality on display.

We all know what is going on. The stock has been stagnant for 8 months now while the Dow and the S&P have raced to record highs almost daily. You can't understand why and feel the need to remind everyone how great the company is, DAY AFTER DAY AFTER DAY. Here is the problem - we all already know that. That is not the reason the stock is stagnant.

The law of large numbers is. As percentage growth declines as a company grows increasing larger (this is an undeniable trend), the multiple investors will pay for shares also decreases. That is what is happening to Google. That is it.

It is not that folks do not "understand" it or "hate" it. People are now at the "show me" stage of Google growth, not the "don't worry, it will happen" stage. If Google performs, so will the stock, if not, it won't. Period. No conspiracy, no short sellers, no confusion by the unwashed masses.

I need to go, there are 43 articles on "Google Gears" clogging my inbox. I need to get rid of them before Schmidt eats lunch and that coverage starts.

Comments

[Daniel Ogden:]

You could be right about Google, but try Googling "Law of Large Numbers" before mis-using the term again. Yea, I know everybody does it, but the "law" as used on Wall Street doesn't exist.

2007 Jun 01 10:12 AM

[Tom B:]

They are (and will continue) whipping MSFT's bottom with regards to monetizing the Web. They are kicking YHOO's bottom, too. I am glad I own some GOOG. I don't affix the label "innovative" to very many companies: NeXT, Apple; SGI, in the nineties; El Gato; PiXAR; Netscape (the early years); Palm, the first couple of years. I call GOOG innovative.

The bathroom humor relating to Mr. Schmidt was kind of coarse.

2007 Jun 01 10:47 AM

[larry.mayer:]

Interesting take on the strategic difference between MSFT and GOOG

mnrtrading.blogspot.co.../

2007 Jun 02 12:17 AM

[Tom B:]

The discussion about "sapping" at the link you cite was a good read.

The irony here is that while Monkey-Boy Ballmer spends billions fighting LINUX, and Google, and Sony, its real nemesis has positioned itself for a knock-down blow. The fundamental problem with MSFT, as an old and fat company, is that having spent five years layering eye-candy on Windows XP and calling it "Vista", users are slowly figuring out that the gap between Windows and UNIX-based, modern, secure, high-performance operating systems (like OS X) is getting wider, not narrower. But for MSFT to retrench and rebuild Windows on top of UNIX at this late date would take them AT LEAST another 10 years. They don't have that long.

2007 Jun 04 09:05 AM

[charles656oio:]

Thanks for uploading this, it gave me something to read on my lunch break.
Shareware
www.mostshareware.org

2007 Jun 04 12:13 AM

[Charles Fig...:]

It's "couldn't care less" or "could not care less" -- remarkable how common this mistake is.

The point you're trying to make is plausible, but I think it applies more to old conglomerates -- companies barely referred to as "growth" and targeting some bit over GDP with decent margins. The market shouldn't be handling GOOG this way, but then again it's always right and I guess we'll just have to wait and see. Frankly, I don't understand how YHOO or AMZN, or some others can command the P/E's they do versus a company like GOOG.

I'm more inclined to think folks are just afraid of the illusion of the big price tag. They aren't looking at the share count or EPS -- they just see the big number and that makes a lot of (ignorant) people nervous.

Speaking of stools -- it's time for me to flush and get to work. :-)

2007 Jun 04 07:26 AM