So is Hindsight Really 20/20?

Checkl the date on this story. Google is $295.71 today up $4.46. I am expecting $330 by Sept. and $350 in the Christmas rally by year end.

Smartmoney.com: Common Sense: I'm Glad I Googled Myself

I'm Glad I Googled Myself

By James B. Stewart
August 24, 2004
SO THE GOOGLE (GOOG) auction is over. Wall Street investment bankers could barely suppress their glee last Wednesday, when Google had to slash the range of its expected offering price to $85 to $95 and cut the number of shares offered. The unusual Dutch auction Google used to bypass Wall Street was widely derided in the press as a failure. Google's cocky founders had to eat crow.

But who's having the last laugh now?

With Google shares edging up toward $110 in regular trading, suddenly opinion has whipsawed in Google's favor. People who listened to Wall Street and sat out the auction are publicly moaning that they made a mistake and missed an opportunity. Columnists who were bashing Google just days ago are hailing the auction. The headline on Monday's New York Times column by Floyd Norris was "Google's offering proves stock auctions can really work." That must have been news to Times readers.

Google's founders, Sergei Brin and Larry Page, and their venture capitalists look especially smart for their decision to hold back their shares rather than sell at the offering price of $85.

After bidding for 100 shares at $110 and another 100 at $90, I was delighted to get 149 shares for at the bargain price of $85. Google offered no explanation for how it pro-rated its shares. I was surprised not to get the full allotment; if every bidder got just three-quarters of the shares requested, then Google could have set a higher price to clear the offering. I'll be curious to know how Google handled this pro-ration once the quiet period ends and it can answer questions.

Still, I'm not complaining. Under the old system, I wouldn't have gotten any shares, not being a member of the club of favored Wall Street investors. And of course I'm happy to be sitting on a nearly 30% gain in my initial investment, not that it matters at this juncture. I'm just the kind of investor Google said it wanted. I haven't sold any shares, and I don't intend to do so anytime soon. I'm betting on Google for the long term.
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In all the excitement over the Google auction last week, I didn't get a chance to bring you up to date on my latest portfolio additions. I alerted readers two weeks ago2 that a buying opportunity was imminent, with the Nasdaq nearing 1750. On both Aug. 12 and 13, the Nasdaq came within hundredths of a point of 1750 (though it never dropped below it) which was close enough for my purposes. In part I made my decision because the mood was so bleak. As I've often said, my formula isn't intended to be an exact science; it provides guidelines, to which you have to add some common sense.

So I went on something of a spree, buying stocks I've recommended in this column. These included some beaten-down tech stocks that have recently had solid earnings (Juniper (JNPR3) and Cymer (CYMI4)); and some special situations (more Nortel (NT5)). I also checked options prices, and found some surprisingly small premiums on long-term options that don't expire until 2006. I bought call options on Wal-Mart (WMT6) (a stock that recently hit a 52-week low), old-favorite Applied Materials (AMAT7) and another special situation I discussed recently8, Corinthian Colleges (COCO9). Last week's rally pushed all of these positions into solid gains.

As this experience indicated, buying opportunities can be fleeting, so you have to be ready to strike while the iron is hot. Keep a list of stocks you want to buy, and update it regularly. But if caught unprepared, you can always buy an index fund or an exchange-traded fund.

Speaking of special situations, both Nortel and El Paso (EP10), two special-situation stocks I own and have recommended, delivered their long-awaited financial restatements this week. Both reports came as a relief, since they contained no surprises and confirmed the basic health of the companies' respective businesses. Both stocks got a nice bump, with Nortel now over $4 and El Paso over $8. But even though much of the risk of further scandal has now been reduced, neither of these stocks is back to its pre-scandal price ($8 for Nortel, nearly $10 for El Paso). This suggests there's still room for gain, especially if they can now concentrate on business rather than accounting scandals.

Links in this article:
1http://www.smartmoney.com/cfscripts/Director.cfm?searchString=GOOG
2http://www.smartmoney.com/commonsense/index.cfm?story=20040810
3http://www.smartmoney.com/cfscripts/Director.cfm?searchString=JNPR
4http://www.smartmoney.com/cfscripts/Director.cfm?searchString=CYMI
5http://www.smartmoney.com/cfscripts/Director.cfm?searchString=NT
6http://www.smartmoney.com/cfscripts/Director.cfm?searchString=WMT
7http://www.smartmoney.com/cfscripts/Director.cfm?searchString=AMAT
8http://www.smartmoney.com/commonsense/index.cfm?story=20040810
9http://www.smartmoney.com/cfscripts/Director.cfm?searchString=COCO
10http://www.smartmoney.com/cfscripts/Director.cfm?searchString=EP



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