"If the current share price holds, the implication is that the Company will not grow net income from 2008 levels for another three years, assuming that a stock’s return (30% CAGR, today) trends towards the long-term growth rate of a company." ----------------------... The clause begining with "assuming" underlies the fallacy of rear-view mirror investing. Understand that the same thing could have been said for Yahoo! in 2002. This is the pitfall of using past performance and chart lines to develop expectations for future performance. One commentor said that Google's "infrastructure" created a "significant barrier to competitors." Again, apply that to Yahoo! circa 2000. On the internet, a better product can unseat the biggest competitors within a couple years.
I will speak heresy and say that there remain massive advances to be acheived in artificial intelligence, online finance, language, interface, cost, and information dissemination/overload control. Past experience indicates that established technology leaders such as Atari, Sony, IBM, Microsoft, and Yahoo are typically the least likely to drive these disruptive innovations. The reason is simple - top-notch innovators can make more money with their own businesses than by donating their output to a corporation. Google's innovative benefits and stock options won't be enough to offset this basic dynamic.
This risk of sudden obsolecence should be reflected by discounted growth among technology companies. I just don't see that in the pricing for most technology companies. I see an annuity present value approach applied to inherently ephemeral companies, justified by past performance.
"...it is interesting to note that all short term indicators were overwhelmingly positive just before Google’s swift and violent correction over the last month." ----------------------... Suggesting that there is something wrong with using these "indicators" to predict the stock price in the first place, right? If reality disagrees with your theory, pick a new theory.
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"If the current share price holds, the implication is that the Company will not grow net income from 2008 levels for another three years, assuming that a stock’s return (30% CAGR, today) trends towards the long-term growth rate of a company."
Mar 11 12:22 PM
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1 Like
All Comments by Chris B »Is Google a Great Buy Now? [View article]
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The clause begining with "assuming" underlies the fallacy of rear-view mirror investing. Understand that the same thing could have been said for Yahoo! in 2002. This is the pitfall of using past performance and chart lines to develop expectations for future performance. One commentor said that Google's "infrastructure" created a "significant barrier to competitors." Again, apply that to Yahoo! circa 2000. On the internet, a better product can unseat the biggest competitors within a couple years.
I will speak heresy and say that there remain massive advances to be acheived in artificial intelligence, online finance, language, interface, cost, and information dissemination/overload control. Past experience indicates that established technology leaders such as Atari, Sony, IBM, Microsoft, and Yahoo are typically the least likely to drive these disruptive innovations. The reason is simple - top-notch innovators can make more money with their own businesses than by donating their output to a corporation. Google's innovative benefits and stock options won't be enough to offset this basic dynamic.
This risk of sudden obsolecence should be reflected by discounted growth among technology companies. I just don't see that in the pricing for most technology companies. I see an annuity present value approach applied to inherently ephemeral companies, justified by past performance.
"...it is interesting to note that all short term indicators were overwhelmingly positive just before Google’s swift and violent correction over the last month."
----------------------...
Suggesting that there is something wrong with using these "indicators" to predict the stock price in the first place, right? If reality disagrees with your theory, pick a new theory.