If you are a stock trader you might have made money using Google (NASDAQ: GOOG) as an instrument of the trade. If you were someone jumping on the band wagon at the wrong time, say GOOG at $750 -- I feel your pain.But if you are a traditionalist and bought the stock early and simply held on, the interesting thing is you would not have done any better than if you had bought a Standard and Poors 500 index fund.
The chart below illustrates that buying either Google or the S&P three years ago would have resulted in nearly the same loss. Although their paths cross a dozen times, they end in the same place.
As I have noted, a fortunate stock trader might have made money here, but looking at the pattern these two investment approaches portray it seems to me that what Google has offered investors to date is only more chances to lose money.
However, if you believe the Google story is just beginning, then this may be the right time to take your best shot while it is trading at a trailing P/E around 18 and a forward P/E (depending on your crystal ball) of 13. I have to confess, I am pondering buying a few shares of Google based on the premise that it will out perform the market during any up-cycle, given its history and a supportive beta of 1.5. Google closed yesterday at $282.05.
What do you think?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of an index fund.
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