Owning Google: Beware Its Volatility (GOOG)

May. 2.06 | About: Alphabet Inc. (GOOG)

Roger Nusbaum submits: Last week I participated in the Ahead of the Curve interview on WallSt.net hosted by Bobby Ilich along with investment author Chuck Carlson. (You have to register to listen but it is free.)

One of the stocks we talked about was Google (NASDAQ:GOOG). My comment, it turns out, was surprisingly on target. I said that there is nothing that will happen on the internet without Google, that I like the new calendar product, that the chart looked like it was rolling over, and that I thought close to $400 might be a better entry point. More importantly, though, I said to own the stock is to realize that on any given day it could be up or down $30.

On Monday came the weird news about Microsoft (I think it is weird anyway) and the stock went to $398-ish. Given that I have no position in the name, I don't have to be the first one to figure out how important the latest news is or is not.

The point of this post is that Google has once again proven itself to be a hot potato. The next bit of news may cause another $20 hit for all I know, but nothing has really changed. They are a dominant Internet company that has some interesting products and ideas. I do have to say I haven't even thought about Google Finance since it first came out in March.

Google is not the only hot potato out there. I think if your are going to own a name like this you need to be prepared for moves like this or be willing to trade it short term.

This relates to a theme I have written about which is understanding what your stocks are capable of doing in the face of news. Just looking up the beta won't cut it. You really need to know how it trades.

Of course, every so often a stock will surprise you. I would have never thought Microsoft could drop 11% in a day.