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January 29, 2010
Searching for Profits in Google
Earlier this week, I purchased a position in Google (GOOG) for all Northlake clients who use individual stocks as part of their portfolio strategy. GOOG pulled back from $630 in early January to $545 with the bulk of the drop occuring following the company's 4Q09 earnings report. A general correction in tech stocks and the possible loss of GOOG's growth opportunity in China also contributed. I see the pullback as an excellent buying opportunity. In 2010, upside exists from a cyclical upturn in advertising and the possibility of a return to China. Beyond 2010, I find the shares quite reasonably valued as GOOG continues its global growth in search, begins to gain material upside from its expansion in display advertising, and participates as an industry leader in mobile advertising. I see upside in 2010 consensus EPS estimates of $31. A 20 multiple on $33 in EPS equates to $660 offers 20% upside. Downside in the near-term, independent of a major market correction, should be modest given the stock has already dropped sharply.
Disclosure: GOOG is widely held by clients of Northlake Capital Management, LLC including in Steve Birenberg's personal accounts. GOOG is held in the Entermedia Funds. Steve Birenberg is co-owner and co-manager of the Entermedia Funds and has a personal investment in the Funds.
Posted by Steve Birenberg at January 29, 2010 09:25 AM in GOOG
DO YOU THINK TODAY'S RALLY IN STOCK IS JUST AN OPPORTUNITY TO SELL CETV ETC. INTO STRENGTH WITH SIGNIFICANT CORRECTION TO COME; OR ARE WE ALREADY NEAR THE BOTTOM OF THIS SELL OFF?
Posted by: MP at January 29, 2010 10:20 AMI think the bulk of the correction has run its course. I expect a bounce soon and think an additional 5% downside is maximum risk. I am a buyer not a seller at current levels.
On CETV, I would not be a buyer until there is clarity on the possible acquisition in Bulgaria. My view of that deal all depends on what they pay. I think upside is limited regardless as advertising appears to be recovering more slowly than expected in their markets and the situation in Greece raises risks for the region.
Posted by: Steve at January 29, 2010 10:38 AM