Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

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Monday, August 28, 2006

Is Google Really a Dead Money Stock?

The basic initial answer is "Probably Not."

It is not popular nor is it in vogue to discuss the Internet search and service behemoth with questions, but if you look over the last month you will scratch your head. It is probably with a high probability that the stock is just taking a breather before it begins a major move. But in which direction?

Over the last month since July 27 the stock has spent almost the entire time in what is basically a $370.00 to $390.00 trading band. This is far from the norm for a massive growth stock. It has only had 4 trading days where it traded under $370.00 and only 3 of those days where it closed under it. In the same time, the stock has only hit $390.00 and not gotten over that hurdle. After looking at the chart and after factoring in its major 50 day and 200 day moving averages, the chart here will probably make it easy to see why.

News for whatever reason is just not impacting the stock. Maybe we can blame August, maybe not. Getting the MySpace from NewsCorp (NWS) was the biggest deal on the web for all of 2006, yet it just hasn't budged. This morning even on a deal with eBay (EBAY) and even with new tools to compete against Microsoft (MSFT) on business offerings the shares are not even up 1%. The company has a $113 Billion market cap and trading volume has been running light. It may be the street starting to demand some greater things from a formerly massive growth stock. The company is worth $113 Billion in market cap, which puts it at roughly 3-times the size of Yahoo! (YHOO) and still slightly under half of the value of Microsoft.

This is a great company and right now the low volatility in the name may be more tied to the calendar and tied to some key moving averages more than anything. They have begun rolling out many services that they will be able to potential monetize down the road. The company began with a pledge of doing no evil, but it has many monetizing ideas for the company if it will tweak some of the offerings they curreently offer for free. It is also hard to say any solid direction right now because of the thin volume and the market, and the fact that no company in history has so rapidly grown into one of the top 10 most influential companies in the world.

We won't take the low road and go against the company because of its dominance and because of its potential that still exists, but it was interesting to look at the how quiet the numbers on the stock have been.

Jon C. Ogg
August 28, 2006

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