Why Is Google Stock So Weak After The Split?

Google splitGoogle’s stock has had a great multi-year run all the way up over $1,200 per share before the split. But starting in March, the stock price started a serious trek downward just like many other Internet companies. While Google’s share price has faired better than some of the other highly recognizable names, the stock is still down a significant 15% from its highs.

Google was supposed to be the company that was firing on all cylinders. Its dominant position in search allowed them to bring in obscene amounts of advertising dollars that fueled all their other exciting pet projects. Google was seen as the innovator while Apple was declared dead in the water with no new product releases and nothing but continued secrecy on the horizon. Google could do no wrong while Apple could do nothing right for almost a two year time span.

What Changed?

Something has obviously changed as Apple is now the strong stock and reaching new 52 week highs while Google struggles everyday to keep in positive territory. I think it is safe to say that there is a fair amount of money being pulled out of Google to go into Apple stock.

What changed is two things:

1) Google search dominance on desk tops and laptops means little in a world that is increasingly going mobile. They have yet to prove that they can meaningfully monetize mobile traffic and have it bring in the same big numbers as the traditional desktop traffic did.

2) Google’s side projects, while innovative and possibly useful in future years, have failed to make any money and investors are now questioning whether they will amount to anything.

The last Google earnings report saw ad prices falling on mobile devices which could be a huge problem in the future. Investors were not happy with that report even though overall growth was good. In this high growth game, Internet companies need to come out with earnings that dazzle every quarter and there just wasn’t enough of that this time around. So the stock dropped.

Add on to that the fact that Google Glass is not popular at all, driverless cars are still a far off dream, and all the other projects Google has been working on are still somewhere in development or in a lab somewhere. Investors have been giving credit for Google’s “vision” but there comes a time when some concrete results need to be seen. I think Google Glass especially, has failed to excite anyone and it may in the end be a niche product for certain professions instead of a device that the general public buys and loves. I know I will never put a Google Glass in front of my eyes!

The Future Of Google Stock

Google is still one of the more stable Internet companies and there is no denying that. However, the days where investors just give a free pass and drive up stock prices without proof may be ending. As mentioned, Google has faired better in this tech sell off than many other companies and that attests to its solid search income that is hard to compete against.

But Facebook seems to have mobile advertising dollars figured out and they are a worthy competitor in that arena. Google needs to get its act together quickly as more and more people only use their smart phones and tablets to connect to the Internet. As we all know, the Internet and people’s habits change very rapidly and while dominant today, that is not a guarantee that they will adapt and be able to make as much money as the industry changes.

Google stock might not be the same growth stock it once was and I think investors are starting to figure that out. So if you do decide to buy shares, be careful of your expectation and keep close watch of what Google does in the coming quarters to get back that growth that they appear to be losing.

Guru Stock Market Newsletters – Buy At Your Own Risk

The very first thing you should understand and accept before paying money to subscribe to a stock market analyst’s newsletter is that they can make more money by selling you that newsletter than they can by investing in the stocks they recommend. Its the same as the gold rush analogy: the people who sold the picks and the shovels to the gold diggers usually made more than the gold diggers themselves.

There is no shortage of guru’s paraded before the cameras of CNBC. The whole stock market guru industry has really taken off since cable TV tried to make these “experts” superstars. They dispense their market knowledge for free on television but invariably they have a newsletter on their website that they would love you to subscribe to.

Dennis Gartman sells his newsletter for around $400 per month which is a considerable amount of money to most investors. He has been in the industry for many years but his exposure on CNBC has undoubtedly increased his stature as well as his number of subscribers.

April 2014 wasn’t kind to Dennis as during that 30 day period he has gone on television and flip flopped twice. At the beginning of the month he was scared and recommended getting out of stocks all together. Some two weeks later he was back on the tube sounding the “all clear” and saying he was cautiously optimistic about the market’s direction. Then in the last week of April CNBC had him on one final time to say that he was back on the sidelines as stocks were just too risky.

No matter how much credibility an analyst has, this is just ridiculous and really helps show that the “pros” don’t have any better idea of what is going to happen to the stock market in the future than you or I do. They say they do, they think they do, and the media wants you to believe they do but they probably don’t. If they did they would be making their living buying and selling stocks with their own money rather than cranking out newsletters and managing other people’s money.

The financial industry isn’t any different than any other industry: there is a lot of money to be made in peddling information. The savy guru types have figured out that they can generate a steady stream of income from dispensing advice risk free. Yes they may make money on the side with their own investments but they all seem to want to build up a side income as that is the safest route. The more media time they can get, the more lines in the water to pick up subscribers or investors who might want to invest in their funds.

So beware and “invest” in these pricey stock market guru newsletter at your own risk. If nothing else, remember that the advice given and predictions made are only guesses no matter how much credibility your guru might have.

Rotation From Growth To Value Continues

Today investors are continuing their exodus out of growth stocks and into less risky value plays. Starting around the beginning of March, companies like Amazon, Netflix, Google, Facebook, Pandora, Yelp, Twitter, Tesla, LinkedIn, 3D Systems, and many other stocks that seemed to defy gravity have fallen back. Fallen back considerably I might add as many of these stocks are down 25% to 50% from their highs.

Market sell off

Clearly much of the money has been going into stocks like Apple and Microsoft as they are up to or near 52 week highs. Apple has been beaten down for so long and now it is finally getting some respect after unexpected great earnings combined with an announced stock split, dividend hike, and additional money being put toward stock buybacks. All that comes with new products promised for later in the year which might include an iWatch and should definitely include an iPhone 6 with a bigger screen. Investors obviously are seeing great potential down the road for Apple.

High growth coupled minimal earnings can only get investors excited for so long. In Amazon’s case, the stock has gone up for years with meager earnings as investors have kept piling their dollars into it. Blind devotion to growth may work for awhile but when the herd turns, you better know when to get out of your high P/E stocks. There is a lot of pain going on right now for people who insist on continuing to hold many of the stocks listed above.

The economy is in much worse shape than the Obama Administration wants you to believe. The high national debt level is an astounding 17 trillion dollars and is expected to reach 19 billion before a new President is elected. This has to eventually be felt on the stock market and it will. Just as investors are now selling out of their high growth holdings, eventually they might decide it is time to get out of stocks completely.

When holding stock positions, you need to track them on a continuous basis. The era of buy and forget for years is gone as industries and market conditions change more quickly than ever before. When buying the old guard staple stocks, you might be able to forget about them longer than these newer industries but it still is in your interest to pay attention on a regular basis. Investments you make are your responsibility and they are comprised of your money: there is no better reason to pay attention to what is happening with the economy and particularly the companies you have your money invested in.