When Morgan Stanley's (NYSE: MS) veteran Internet analyst Mary Meeker estimated that overlay ads on YouTube could immediately add $4.8 billion in gross revenue and $720 million in net revenue to Google's Inc. (NASDAQ: GOOG), her one-time competitor Henry Blodget was puzzled.

Her figures were dramatically bigger than his estimate of $12 million to $360 million of gross revenue. As Blodget discusses in his Silcon Alley Insider blog, Meeker made a huge mathematical blunder. She didn't calculate her estimates using cost per thousands (CPM), the common measurement used in selling advertising. She just forgot to divide by a thousand. So instead of $4.8 billion, Meeker really meant to say $4.8 million and $720 million becomes $720,000.

These ads are insignificant to Google's bottom line.

Blodget, who is turning out to be more honest as a blogger than he was as an analyst, clearly is delighting in jabbing the Internet Queen Meeker. It's odd that no one on her team caught this mistake before it was published.

Investors need to remember that analysts often are wrong. When they guess too low, as Wall Street often has with Google, it's called an "upside surprise" and when they guess too high it's called a "disappointment." This is a game that Blodget knows very well.

Henry Blodget blasts Mary Meeker's Google (GOOG) math originally appeared on BloggingStocks on Fri, 24 Aug 2007 09:25:00 EST. Please see our terms for use of feeds.

In the past few weeks, several friends have asked me if I have any ideas for alternative energy stocks. Although I follow the industry fairly closely, I replied that I do not. I don't think there's any doubt that alternative energy is the future, but as Anne Kates Smith wrote at Kiplinger.com, there are numerous questions surrounding exactly what that future will look like. Another thing for investors to remember: Counterintuitively, just because alternative energy is the future does not mean that investors will be able to make money with these stocks. Even though the internet was certainly the future in 2000, those stocks were a poor investment. Innovative technology does not always mean big profits. Warren Buffett (I used this same quote in a piece on internet video, an industry that suffers from many of the same questions) opined on this paradox, using the airline industry as an example:

Sizing all this up, I like to think that if I'd been at Kitty Hawk in 1903 when Orvile Wright took off, I would have been farsighted enough, and public-spirited enough -- I owed this to future capitalists -- to shoot him down. I mean, Karl Marx couldn't have done as much damage to capitalists as Orville did.

I won't dwell on other glamorous businesses that dramatically changed our lives but concurrently failed to deliver rewards to U.S. investors: the manufacture of radios and televisions, for example. But I will draw a lesson from these businesses: The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.

Continue reading The problem with alternative energy stocks

The problem with alternative energy stocks originally appeared on BloggingStocks on Sun, 01 Apr 2007 10:40:00 EST. Please see our terms for use of feeds.

Pullback in eBay creates buying opportunity originally appeared on BloggingStocks on Fri, 16 Mar 2007 08:10:00 EST. Please see our terms for use of feeds.