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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerThe Dow (DJIA) moved up nicely, hitting all time highs in the past month. It has been rising consistently from its July low, closing yesterday at 12,471.32 and during the day reaching an all-time high of 12,491.91. For the past couple of weeks it has been moving up and down trading in a 250 point range, about 2%.
Is the Dow just taking a breath before the "January effect" takes place moving it still higher? Is there truly a January effect? Is the current movement just our combined tax planning adjustments? The Holidays affecting volume? A distraction? There are those who say the Dow is pausing just to shrink back to some technical level of resistance. I don't buy this technical analysis (crap) either. The Dow will move with earnings reports, interest rates and employment levels and not benchmarks. For now all three are humming along.
Google Inc. (NASDAQ:GOOG) reached an all time high on November 22, 2006 of $513 and has since pulled back to close yesterday at $468.63 with a trailing P/E of 60. It is still over priced in my book. James Cramer of CNBC and TheStreet.com has said it will be at $750 in twelve months (11 now) and quipped that he would like to say it will go to $850 but that might trigger an SEC investigation. I say HOGWASH! GOOG is just as likely to be where I theorized during the summer, closer to $440 than $850. If you listen to Cramer's hype, Google will be bigger than Microsoft Corp. (NASDAQ:MSFT), General Electric Co. (NYSE:GE), Wal-Mart Stores Inc. (NYSE:WMT), or even ExxonMobil (NYSE:XOM) in the foreseeable future.
Seven weeks ago, with Google on fire, I highlighted one of my favorite stocks in GOOG is OK but HNP could be better! At that time, Huaneng Power International, Inc. (NYSE/ADR:HNP) had improved from $26.50 to $32.68 equaling Google's rise of about 23%. Yesterday, HNP closed at $35.37, now a 33.5% gain while Google rose a whole $1.63 from $467.50 or a quarter of one percent, and has gone nowhere in 2006. Oh yes, and while HNP beat the pants off GOOG, it also paid almost a 4% dividend. You will be able to read more about HNP in my upcoming story for 2007 picks ... and beyond.
When it comes to Google, Cramer has had too many sips of his own Kool-Aid. Maybe Google will go higher, but it is in nosebleed territory now. Some have compared it to Microsoft. This is wishful thinking. Microsoft was required to run personal computers, and was a monopoly, or as close to it as one could get. Google is a great company and has had a great strategy so far, but there are alternatives and something better could come along ... just ask Yahoo! Inc. (NASDAQ:YHOO), IAC/InterActive Corp's (NASDAQ:IACI) Ask.com, Alta-Vista, Excite or many other also-rans.
Google the company is still great; Google the stock still a question mark. Cramer is still great, even if I do not agree with him on Google. He does get you to think. I hope I have done the same.
Happy Holidays
Interested in reading more? Check out my other posts for Blogging Stocks here.
Sheldon Liber is the CEO of a small private investment company and the vice president for Design and Research of an architecture & planning firm.
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Reader Comments (Page 1 of 1)
12-20-2006 @ 1:02PM
Andy said...
I'm going with Cramer. There has never been a company like Google. It is not a company -it is a revolution.
12-20-2006 @ 3:38PM
michael said...
Cramer has bad long-term memory.. how can you not think back to those bubble years. All it will take is a little earnings slow-down and google stock will come back to reality.
12-20-2006 @ 4:31PM
linda Smith said...
For once you aren't bashing Google but I guess you can't since you know it's going to go way past its high of 513 and you know you'll just have to eat your words. Funny how you don't come around when Google is doing good only when it's down.
12-20-2006 @ 5:35PM
Sheldon L said...
Linda, You are exactly the type of reader I am trying to reach. I think Google is a great company and GOOG is a risky stock. I have been saying that all year. What are you so enthusiastic about? GOOG stock is less today than it was last January. At it's high of $513 it was up less than the DJIA or S&P 500 for the year. Sure it came back from it's bottom but why do you want to hold a stock that races up and down so much. It is a stock for traders (like Cramer) not investors. HNP will double before GOOG does. All the while paying a dividend and marching upward. HNP has a much higher probability of being $53 before GOOG reaches $950. Why is that so hard to grasp?