Seeking Alpha

Howard Reisman's  Instablog

Howard Reisman
Send Message
Howard is the CEO and co-founder of Black Mountain Capital Management, developers of Stock Rover. Prior to that he founded a company called Heroix, which has now been in business for 35 years providing advanced system management software for large scale corporate data centers. Howard's expertise... More
My company:
Stock Rover
My blog:
Stock Rover
View Howard Reisman's Instablogs on:
  • Why You Should Buy Google In Advance Of Earnings And Hold It For At Least Six Months: A Technical Analysis Of Google

    Google reports its second quarter earnings today, and, while I have absolutely no idea what Google will do in the future, I found some interesting patterns that are too interesting to ignore.

    Let's put GOOG in a Chart and take a look at the past five years.

    (click to enlarge)

    Besides the obvious effects of the 2008 financial crisis, which caused GOOG to reach its nadir in November 2008, it looks like the price is generally going up, but with some noise. Let's put in the 200-day simple moving average to see the trend.

    (click to enlarge)

    The 200-day Simple Moving Average makes it pretty clear that GOOG is indeed trending upward. Now let's see if we can make any sense of the noise around the trend. Because I'm focused on GOOG's earnings report, let's add its earnings.

    (click to enlarge)

    Now if you look carefully, this picture is a bit more telling, and we can actually suss out a pattern. Starting in July 2009, GOOG's price rises from July to January, and then declines from January to July, reaching its local minimum right around the July earnings report. Furthermore, Google looks like it's on track to continue that pattern-its price has been falling for the last few months, and its earnings report, which seems to be the turning point, comes out today. This quick technical analysis, assuming that historical patterns continue, would indicate that it would be wise to buy GOOG now and hold on to it at least through January.

    But, to take it a bit further, let's get rid of the trend, and add the S&P500 as a baseline.

    (click to enlarge)

    You can easily see that GOOG has solidly outperformed the S&P 500 for the last two and a half years, but let's break down the periods into six-month segments by zooming in on the chart.

    From January 2009 to July 2009 GOOG is still on its steady recovery from the financial crisis, and is up 16% from the S&P 500. (Shown below)

    (click to enlarge)

    From July 2009 to January 2010 the price is still rising, and is up a whopping 39% from the S&P 500. (Shown below.)

    (click to enlarge)

    Now here comes the January to July downturn; GOOG's price falls, though still to a comfortable 12% above the S&P 500. (Shown below.)

    (click to enlarge)

    And just like that, GOOG shows itself to be a second-half stock, as shortly after the July earnings report its price rises again, this time closing out at about 26% above the S&P 500. (Shown below.)

    (click to enlarge)

    Despite its first-half slump in 2011, it still stays about 7% above S&P 500. (Shown below.)

    (click to enlarge)

    Another dramatic increase in the second half of the year, with Google ending 37% above the S&P 500.

    (click to enlarge)

    Finally, we've reached the last six months, where, right on cue, Google's prices have fallen. (Shown below.)

    (click to enlarge)

    But the earnings report comes out today, and if you believe that the past can tell us anything about the future, then we can expect to see GOOG's price trend upward through at least January. Not only that, but from a fundamental perspective, GOOG is cheaper than it has ever been. If we take a look a quick look at the Price-to-Earnings Ratio in the chart, we can see that it has been steadily declining despite the upward trend in price.

    (click to enlarge)

    Or, if you'd rather use the Price-to-Cash-Flow ratio for tech companies, you can see that it follows a similar downward trend, and currently is even lower than the P/E ratio.

    (click to enlarge)

    So there you have it. Even if you can't explain it, you can't ignore Google's blatantly cyclical behavior over the past two and a half years; and with the release of its second quarter earnings it's primed to start its annual six-month ascent. That, and its attractive P/E and P/CF ratios, and the fact that it's comfortably above the market make it an all-around attractive buy. The amount of time spent researching this: about 5 minutes. The percent gain over the next six months? We'll find out.

    Disclosure: I am long GOOG.

    Jul 19 3:32 PM | Link | Comment!
  • Apple may fly after earnings
    Lots of iPhones being sold
    Tags: AAPL
    Jan 03 2:00 PM | Link | Comment!
  • I like QCOM. Here is a safer way to enter the stock.
    QCOM is in a slow but steady uptrend, but has been weak recently. I like the company long term on a fundamental basis. A good way to play QCOM may be to sell some near dated puts. If they get assigned, I get a better entry price than today's price. If they don't, I get paid and can redo the same trade next options cycle. 

    QCOM Chart
    Tags: QCOM
    Dec 07 1:06 PM | Link | 1 Comment
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.