Short Sell Google?

[Emperor]

I am thinking of shorting Google for all of the obvious reasons.

With a not so obvious reason that Microsoft's new OS will have a VERY similar product built-in.

My only fear is that there has been a ton of insider selling, and a ton of shorting already, which may have the price DEPRESSED??????

Any comments, ideas, suggestions??

[lastsamurai]

only if you want the bid to get WACKED.

As long as the stock as strong earnings...great relative strength..there is no reason to short the stock.... if you want to lock in the profits just buy puts.

[Emperor]

[ QUOTE ]
if you want to lock in the profits just buy puts.

[/ QUOTE ]

Umm what profits would those be? This is a $150 stock trading at $300 IMO.

Selling short means I can wait forever for the stock to fall.

Buying puts means I have to be able to anticipate how soon and how fast it will drop, and I have no idea.

Please explain the advantage. I'd also like to know why buying puts in this situation is better than selling calls.

[TStoneMBD]

harry s dent, a theorist that appears to be respected on this forum says that we will go through a second tech boom in the next few years. leading technology companies such as google, according to him, will continue to rise tremendously as they capitalize on the surging tech boom.

i dont know much about the current market, nor do i know if harry s dent is just a lunatic, but i thought i would provide this food for thought.

[RunDownHouse]

Even though everyone intelligent knew stocks were WAY overvalued during the tech bubble, very, very few could afford to short those stocks long enough to not lose their shirt.

I don't know one way or the other about GOOG (other than they look expensive, of course), but stuff like this (http://www.business2.com/b2/web/articles/0,17863,1093558-1,00.html) is enough to scare me.

[lastsamurai]

if you own the stock already you buy puts to protect your profits..... selling COVERED calls is the safest option strategy out there... This is the only option strategy they let you use in IRAs I guess the difference between buying puts and selling calls is how much of a gamble you have

[buffett]

[ QUOTE ]
Selling short means I can wait forever for the stock to fall.

[/ QUOTE ]
Yeah, good luck with that, especially when your broker issues a margin call (http://en.wikipedia.org/wiki/Margin_call).
-web

[Uglyowl]

[ QUOTE ]

Umm what profits would those be? This is a $150 stock trading at $300 IMO.

[/ QUOTE ]

GOOG has real profits and the street estimate is $7.34 for next year. If you think GOOG is worth a P/E of 20 you are smoking crack.

You're smoking crack if you think ANY stock is EVER worth more than a P/E of 20. I have trouble buying stocks with P/E's over 15. If it works for the greatest investor of all time, why not me?

I think this is, however, a bad buy. The stock is going to stay ridiculously overpriced for a while to come, I suspect.

[lastsamurai]

[ QUOTE ]
You're smoking crack if you think ANY stock is EVER worth more than a P/E of 20. I have trouble buying stocks with P/E's over 15. If it works for the greatest investor of all time, why not me?

[/ QUOTE ]
So basicly what you are trying to tell me is if a company has earnings growth rate of 100% a year and forcasted to meet their numbers a PE over 20/30 is over valued? compared to a company like ford that has a PE of 10 with little or no growth rate to have better value? You have to remember...you have to treat companies like the drity sluts that they are and put your sell points when they start acting up.

Get the William Oneil book and read the section on PE ratios. Then read the section on the 20 points on when to sell.

[Sniper]

[ QUOTE ]
Please explain the advantage. I'd also like to know why buying puts in this situation is better than selling calls.

[/ QUOTE ]

Well considering that based on your OP you don't own any GOOG stock...

If you are wrong and GOOG keeps going up, with buying puts you've lost a litttle bit of money, while your sold calls will cost you alot of money.

If you are right and GOOG drops like a rock, your bought puts will make you tons of money, while your sold calls will make you a small amount of money.

So bottom line (when naked, you dont own the stock)...
Buy Puts = Low Risk, High Reward.
Sell Calls = High Risk, Low Reward.

I wouldn't recommend either strategy with GOOG at this point.

[ctv1116]

It'stoo late (http://biz.yahoo.com/ap/050818/google_offering.html?.v=11) now. Google announces 14.2 million share dilution, stock down 10 in pre-market trading.

[buffett]

[ QUOTE ]
I have trouble buying stocks with P/E's over 15. If it works for the greatest investor of all time, why not me?

[/ QUOTE ]
I'm assuming you're referring here to Warren Buffett. Do you know the P/E of KO when he bought it in the late 1980s? What about the implied P/E he would have paid if the KO puts he sold in 1993 would have been exercised? Hint: both are way more than 20.
-web

[DesertCat]

[ QUOTE ]
[ QUOTE ]
I have trouble buying stocks with P/E's over 15. If it works for the greatest investor of all time, why not me?

[/ QUOTE ]
I'm assuming you're referring here to Warren Buffett. Do you know the P/E of KO when he bought it in the late 1980s? What about the implied P/E he would have paid if the KO puts he sold in 1993 would have been exercised? Hint: both are way more than 20.
-web

[/ QUOTE ]

This is a great example. The reason Buffett was willing to "pay up" for Coke was that it's earnings were extremely predictable, he knew that people weren't going to stop drinking coke, and that as it more deeply penetrated foriegn markets the numbers of dedicated coke users er drinkers would continue to rise at fairly predictable rate.

Google's growth on the other hand is more difficult to predict. It should continue to grow rapidly, and if it does it may be worthy of it's high PE. But if Microsoft, Yahoo or some other company builds a better mousetrap, causing it's growth to slow or even stop, then it's hugely overpriced. That's why Buffett has stayed away from tech companies, he just can't calculate the permanence of their competitive advantages with enough certainty.

I might add that the founders of Google are similar to Buffett in mindset. I'm guessing that their new offering is an attempt to take some chips off the table in case of some future bad events. I don't think they would sell any shares at this price if they thought GOOG was undervalued, clearly they think that current prices don't compensate for all the future risks.

[Sniper]

[ QUOTE ]
I might add that the founders of Google are similar to Buffett in mindset. I'm guessing that their new offering is an attempt to take some chips off the table in case of some future bad events. I don't think they would sell any shares at this price if they thought GOOG was undervalued, clearly they think that current prices don't compensate for all the future risks.

[/ QUOTE ]

The latest Google offering appears to be preparation for a significant future acquisition and/or large infrastructure development.

Way more than 20 is a lot different than way more than 60. Sorry that I don't have the same risk tolerance/intuitive knowledge of the stock market as warren buffet, I use my knowledge to my advantage and don't take as big of risks as he would take (hint: he had a lot more money in 1980 than i will ever have, spent much more time researching stocks, and is just plain a lot smarter than i will ever be. I am willing to admit this and take a more conservative approach).

[DesertCat]

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The latest Google offering appears to be preparation for a significant future acquisition and/or large infrastructure development.

[/ QUOTE ]

I don't believe it. I believe this is wall street spin spun by their investment bankers.

Google has over $3B in cash. It's on pace to add another $1B by the end of the year. It's market cap is $78B. It has no debt. Using cash, stock or debt, it has tens of billions of dollars of "acquisition power", and it can easily finance $4B in infrastructure additions from debt or a combination of cash and cash flow.

Clearly, they don't need the cash. They are Buffett followers who believe it's time to sell stock when the stock is overvalued. Instead of selling their own holdings, they do a secondary where the cash will sit on their balance sheet to do their bidding. If GOOG stumbles badly, it's value will be held up by the $10B or so in cash they'll have in a year or two after this offering.

[BadBoyBenny]

[ QUOTE ]

Selling short means I can wait forever for the stock to fall.

[/ QUOTE ]

What gives you that idea?

[Uglyowl]

[ QUOTE ]
Sorry that I don't have the same risk tolerance/intuitive knowledge of the stock market as warren buffet,

[/ QUOTE ]

Fine if buying it is too risky for you, but short selling was the original question and that is far more risky IMO.

[BottlesOf]

nm

[Uglyowl]

Yeah no kidding.. this guy hasn't been back since he made that comment.

Love the people who see a stock over $200 and think too high, but if it split 4-1 and was $50 it would be a bargain, lol.

hahahaha....i totally agree....i just left a post over in the other google forum....people don't seem to understand the power of future earnings on a stock/ understand that the price of a stock is totally arbitary....one day they'll understand

[buffett]

[ QUOTE ]
people don't seem to understand the power of future earnings on a stock/ understand that the price of a stock is totally arbitary

[/ QUOTE ]
i'm a people who doesn't understand your comment. which part are you saying is true....the 'earnings' part or the 'arbitrary' part?

i was saying that google isn't a short sell b/c of its EPS will continue to grow..and on the stock price, i do not think i said that very clearly...essentially, i thought people were thinking google was a good short b/c the stock price is so high, but obviously, it doesn't matter what the stock price is...it isn't overvauled simply b/c its a $400 stock...the stock price is arbitrary; if they split 4-1 for example, as someone previously mentioned, it seems as though a lot of people would think its not overvalued, which is of course totally ridiculous...
something else that i found very interesting..i was flying home yesterday so i was re-reading a section in jim cramers book, real money...the following can be found on page 275: "never short because of valuation. never short because you think the stock's too expensive. expensive stocks have a way of getting more expensive. i don't care what p/e qualcomm sells for, i don't care whether you think yahoo or google is absurdly valued. it is irrelevant that some stock that trades at $50 and has no earnings. you must never, ever try to call an irrational top solely based on multiples of sales earnings. there will always be some mutual fund out there that will keep the ball in the air and crush you with its buying. michael steinhardt, my wife's guru, taught this basic point to her, but he repeatedly violated it himself. he lost oodles of money shorting overvalued stocks."

and this is coming from a man, as most of you know, is considered one the best traders in the world....and if anyone hasn't read his book, real money, you need to get up off your ass and get it...it will knock your socks off

[DesertCat]

[ QUOTE ]

something else that i found very interesting..i was flying home yesterday so i was re-reading a section in jim cramers book, real money...the following can be found on page 275: "never short because of valuation. never short because you think the stock's too expensive. expensive stocks have a way of getting more expensive. i don't care what p/e qualcomm sells for, i don't care whether you think yahoo or google is absurdly valued. it is irrelevant that some stock that trades at $50 and has no earnings. you must never, ever try to call an irrational top solely based on multiples of sales earnings. there will always be some mutual fund out there that will keep the ball in the air and crush you with its buying. michael steinhardt, my wife's guru, taught this basic point to her, but he repeatedly violated it himself. he lost oodles of money shorting overvalued stocks."

and this is coming from a man, as most of you know, is considered one the best traders in the world....and if anyone hasn't read his book, real money, you need to get up off your ass and get it...it will knock your socks off

[/ QUOTE ]

A lot of people consider Cramer not as a good "trader", but instead an ethically challenged individual who (allegedly) performed many borderline illegal "pump and dump" trades using CNBC as his tout network.

But he's right on in this quote. No one can call the top of an irrational valuation. And you shouldn't short good companies at cheap valuations. So I wonder what Cramer was thinking when he recommended a short on Berkshire Hathaway at $48,000?

[ QUOTE ]
I am thinking of shorting Google for all of the obvious reasons.

With a not so obvious reason that Microsoft's new OS will have a VERY similar product built-in.

My only fear is that there has been a ton of insider selling, and a ton of shorting already, which may have the price DEPRESSED??????

Any comments, ideas, suggestions??

[/ QUOTE ]

From what I understand, many of the top people in the industry want to work for Google.

That's not the type of company I want to bet against.

IMO (and Lord knows I've been wrong before) Google has a better chance of going to 500 than 300.

[Ed Miller]

[ QUOTE ]
So I wonder what Cramer was thinking when he recommended a short on Berkshire Hathaway at $48,000?

[/ QUOTE ]

Maybe he only shorted 3 shares.