However, since August I've had a bit of a concern about an advertising slowdown, more tied in with the mortgage company blowups (who do a huge amount of internet advertising) [Aug 30 - Google (GOOG) Can't Get Any Traction - Is This Why?] Google proved me wrong with an excellent earnings report last quarter, but now my worry extends more in a general economic sense. In a slowdown/recession the first thing to go is advertising as it is easy to cut. With that said, internet advertising is still in a secular growth trajectory. So the question is, when advertising will be cut, what will be the first to go? Traditional or online advertising? The second question is - does it really matter? Remember, 'Perception is Reality' - even if online advertising stays strong will people begin to move to the side of the aisle that says "so what, eventually advertising online will also be cut". If that is the perception than the stock will suffer, unfairly or not.
Either way, no reason to take the risk, and I am cutting my already small position in half. I have been debating this the past week, only to watch the stock continue to fall. This reduces Google from 1.1% of fund to 0.55%. If the stock implodes from that level, so be it - it won't have a large effect and I still like Google in the long run as a dominant franchise. I do expect its wayward competitor Yahoo (YHOO) to be bought out as I wrote in my 13 2008 Outlier predictions. I am selling 11 shares in the $550s. Technically the stock has closed below its 200 day moving average the past 2 sessions, which is another negative factor. Looking at a long term chart, there is some support around $500 and then $450. So those might be areas I buy back some stock if it falls; I still like the franchise - and one day the market will again embrace these names. But $450 is 22% lower from here.
Overall I have very small loss in Google, around $500 since inception. The stock has done a complete round trip since I began buying in August, and I have done very little trading in this stock, trying to just buy and hold. But as I keep saying, this is not a market for buy and hold investors and I gave up all my gains in this name. With earnings tomorrow, I don't want to bother with earnings risk, and this is exactly the type of name that has been punished brutally for saying "anything" - you say good things, you fall, you say bad things, you fall. So short of promising the world, I don't see how Google does not fall tomorrow. Not due to their business but due to fears and risk perceptions and multiple contractions. The stock now trades at 26x 2008 estimates, which is quite good for a company of its size growing so quickly - but I said the same thing for Apple (AAPL), and again in this environment, "value" means nothing. Earnings multiples mean nothing. All that matters is people don't want these stocks. Period.
Long Google, Apple in fund; no personal position
