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#11
08-18-2005, 04:37 AM
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Re: Short Sell Google?
[ 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. 
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#13
08-18-2005, 04:53 PM
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Re: Short Sell Google?
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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
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#14
08-19-2005, 05:20 PM
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Re: Short Sell Google?
[ 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.
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#15
08-19-2005, 05:32 PM
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Re: Short Sell Google?
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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.
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#16
08-19-2005, 05:35 PM
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Re: Short Sell Google?
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).
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#17
08-19-2005, 06:21 PM
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Re: Short Sell Google?
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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.
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#18
08-19-2005, 08:03 PM
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Re: Short Sell Google?
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Selling short means I can wait forever for the stock to fall. [/ QUOTE ] What gives you that idea?
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#19
08-20-2005, 01:05 PM
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Re: Short Sell Google?
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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.
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