Google Shows No Sign Of Stopping

Everyone was told at some point that if something sounds too good to be true, it probably is. As much as we're drawn to follow the crowd, we're also hardwired to be suspicious of what seems like a free lunch. This kind of healthy skepticism is essential to successful investing, but sometimes a spade really is a spade and you can join the crowd on the way to making serious money.

One key point in this tip is to know that even if you didn't get in at the very beginning, you can still make money off a stock. Or, as I put it in my book, "the payout might be greater for the first spotter of a trend, but a trend rider who rides the wave a bit later can still make out just fine."

Probably the best example of this trend tip from the past few years is Google Inc. (GOOG). This company went public in August 2004 at $85. Now it's trading in the $560s. Obviously someone who got in at the IPO would have made quite a profit. But even if you'd bought two years after the IPO, you'd have bought at $468. Many people at the time would have thought $468 was simply crazy to pay for any stock, but a year later the people who invested then are looking at a 25% return a year later, which isn't bad at all.

The fact is that if you buy now at $568, you still have a good chance of making a solid return on your investment. Google's revenues continue to grow and the company continues to reveal fascinating new plans for growth. They have tons of cash and little debt and are poised to keep acquiring companies here and abroad, and I fully expect Google to hit $600 in 2008 and to keep growing.

Type of stock: The wildly popular Internet stock that shows no sign of stopping.

Price target: I'm not sure there is one. Buy when you can before it goes up any further.

Comments

[Manoj]

You make a rather weak case. Just because something has gone up, does not mean it will go up in the future.

Agreed, that Google's revenues are growing and there seems to be no stopping. But 90% of your article is looking in the rear-view mirror and only 10% looks ahead into the future.

[jonreagan]

As usual, Hillary is right on. In an appearance on "Nightly Business Report" three weeks ago, she recommended Baidu (BIDU) when it was around 275, using the same reasoning she applies in this article. Somewhat skeptically, I bought Jan '08 320 calls. Needless to say, I'm glad I followed her advice.