innerscorecard Posted January 16, 2015 Share Posted January 16, 2015 http://www.usatoday.com/story/money/cars/2015/01/14/google-self-driving-cars-detroit/21768419/ Link to comment Share on other sites More sharing options...
Palantir Posted January 16, 2015 Share Posted January 16, 2015 Ex-Googler: 'Tons Of Engineers' Want To Leave Google http://finance.yahoo.com/news/ex-googler-tons-engineers-want-160246466.html The prominent venture capitalist we spoke last week to says that he doesn't expect Google CEO Larry Page to sit back and allow Google's stock price to flounder much longer. This VC said that Page knows that the health of the stock is directly correlated with retention and that it has become far to easy for people like him to poach Googlers. This source said that he expects Google to get revenues accelerating again by taking more advantage of its massive footprint in mobile, where it owns the world's largest computing operating system, Android. Link to comment Share on other sites More sharing options...
rkbabang Posted January 16, 2015 Share Posted January 16, 2015 From: Exec: Google won't become an automaker "Not all automakers are enthusiastic. Fiat Chrysler CEO Sergio Marchionne cast doubt Tuesday night on whether consumers will embrace them. They'd rather drive themselves, he says." This strikes me as one of those quotes that people will look back on in 20 years and crack-up laughing about how out of touch and short sighted he was. It will probably be listed here in bold: http://en.wikiquote.org/wiki/Incorrect_predictions Link to comment Share on other sites More sharing options...
Palantir Posted January 17, 2015 Share Posted January 17, 2015 You don't like driving? You'd prefer being driven by somebody else? I think Marchionne, as a lover of cars is on point. Link to comment Share on other sites More sharing options...
Patmo Posted January 17, 2015 Share Posted January 17, 2015 You don't like driving? You'd prefer being driven by somebody else? I think Marchionne, as a lover of cars is on point. I'd prefer my machine driving itself, meanwhile I could obsessively refresh the quotes page while heading to work. Living the good life. Link to comment Share on other sites More sharing options...
ScottHall Posted January 17, 2015 Share Posted January 17, 2015 I bought shares of GOOG recently. Appears to be pretty cheap at today's prices, at least by my eyes. Link to comment Share on other sites More sharing options...
siddharth18 Posted January 18, 2015 Share Posted January 18, 2015 I bought shares of GOOG recently. Appears to be pretty cheap at today's prices, at least by my eyes. Hey Scott - What is your thesis on going long GOOG? How long do you plan on holding it? Meaning are you looking to exit it at a predetermined price or do you plan on holding it until you feel their business deteriorates? Link to comment Share on other sites More sharing options...
ScottHall Posted January 18, 2015 Share Posted January 18, 2015 I bought shares of GOOG recently. Appears to be pretty cheap at today's prices, at least by my eyes. Hey Scott - What is your thesis on going long GOOG? How long do you plan on holding it? Meaning are you looking to exit it at a predetermined price or do you plan on holding it until you feel their business deteriorates? The latter. This is a business that is still growing extremely quickly, is very likely to be one of the big winners of the shift of ad dollars to online/mobile, and isn't selling for a particularly demanding multiple net of cash. In power law businesses, we almost always underestimate the potential of the winners... They'll probably blow some of it mining moon rocks, but I like the odds here. Link to comment Share on other sites More sharing options...
saltybit Posted January 23, 2015 Share Posted January 23, 2015 Google to Sell Wireless Service in Deals With Sprint, T-Mobile http://www.wsj.com/articles/google-to-sell-wireless-service-in-deals-with-sprint-t-mobile-1421887967 Link to comment Share on other sites More sharing options...
karthikpm Posted January 30, 2015 Share Posted January 30, 2015 http://www.businessinsider.com/google-earnings-q4-2014-2015-1 Link to comment Share on other sites More sharing options...
karthikpm Posted February 12, 2015 Share Posted February 12, 2015 http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html?hp&action=click&pgtype=Homepage&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below&_r=0 Link to comment Share on other sites More sharing options...
ScottHall Posted February 12, 2015 Share Posted February 12, 2015 http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html?hp&action=click&pgtype=Homepage&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below&_r=0 This is an interesting article. Google stock is certainly looking pretty cheap, at least in my view, but the concern over brand vs. direct response is legit. Although direct response is the more legitimate of the two (IMO), most ad spending is brand spending and that's where the big money - TV ad dollars - is. And it's not really Google's forte, outside of Youtube. That's not to say it won't be a good investment... I own shares of both Google and Facebook, and I think both will be big winners from today's prices over time. Link to comment Share on other sites More sharing options...
plato1976 Posted February 12, 2015 Share Posted February 12, 2015 curious how do you value facebook and decide it's cheap I have difficulty to value it http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html?hp&action=click&pgtype=Homepage&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below&_r=0 This is an interesting article. Google stock is certainly looking pretty cheap, at least in my view, but the concern over brand vs. direct response is legit. Although direct response is the more legitimate of the two (IMO), most ad spending is brand spending and that's where the big money - TV ad dollars - is. And it's not really Google's forte, outside of Youtube. That's not to say it won't be a good investment... I own shares of both Google and Facebook, and I think both will be big winners from today's prices over time. Link to comment Share on other sites More sharing options...
ScottHall Posted February 12, 2015 Share Posted February 12, 2015 curious how do you value facebook and decide it's cheap I have difficulty to value it http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html?hp&action=click&pgtype=Homepage&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below&_r=0 This is an interesting article. Google stock is certainly looking pretty cheap, at least in my view, but the concern over brand vs. direct response is legit. Although direct response is the more legitimate of the two (IMO), most ad spending is brand spending and that's where the big money - TV ad dollars - is. And it's not really Google's forte, outside of Youtube. That's not to say it won't be a good investment... I own shares of both Google and Facebook, and I think both will be big winners from today's prices over time. View it in power law terms. If Facebook has staying power (I think it does), the business is not going to generate 2x the revenue it does today. It'll be more like 5x or 6x, and possibly even more. People really get screwed up with this era's growth stocks by comparing them to high multiple stocks in the past. In some cases that works, but the world is simply different than it was in grandpa's day. Many of the high multiple companies of today are essentially infinitely scalable without heavy need for capital reinvestment. Use that framework, add in one of the largest (perhaps the largest) network effects in the history of man, and it's really not hard to see how the company could prove to be cheap at today's prices. You're paying a high multiple of earnings for it, yes, but that's not the best framework to use when looking at it. I fell into the same trap a few years ago as many do today regarding this company. Value investors need to get over sticker shock, because these business models are very different than pretty much anything we've seen before the past dozen years or so. The old metrics and methods of analysis still matter - a company is only worth the cash it can generate its owners over time - but they need to be looked at from a different angle to really get the whole picture. Link to comment Share on other sites More sharing options...
cubsfan Posted February 12, 2015 Share Posted February 12, 2015 Terrific post Scott Link to comment Share on other sites More sharing options...
plato1976 Posted February 12, 2015 Share Posted February 12, 2015 Two things I want to learn from you: 1. I do agree with all the qualitative points you raised below. But how do you quantify them? why fb should be valued at 100B, 200B or 500B, 1 trillion now? I have some difficulty to apply a number - even very roughly to get the magnitude correctly 2. In terms of network effects, are you worried about the "youth problem". Seems this network is not that sticky to youth and they like to use other network. Certainly FB used acquisition to mitigate this problem but this just shows their moat is not as strong as ppl thought? In overall I do agree with you it may not be a stock as exp as it looks. curious how do you value facebook and decide it's cheap I have difficulty to value it http://www.nytimes.com/2015/02/12/technology/personaltech/googles-time-at-the-top-may-be-nearing-its-end.html?hp&action=click&pgtype=Homepage&module=mini-moth®ion=top-stories-below&WT.nav=top-stories-below&_r=0 This is an interesting article. Google stock is certainly looking pretty cheap, at least in my view, but the concern over brand vs. direct response is legit. Although direct response is the more legitimate of the two (IMO), most ad spending is brand spending and that's where the big money - TV ad dollars - is. And it's not really Google's forte, outside of Youtube. That's not to say it won't be a good investment... I own shares of both Google and Facebook, and I think both will be big winners from today's prices over time. View it in power law terms. If Facebook has staying power (I think it does), the business is not going to generate 2x the revenue it does today. It'll be more like 5x or 6x, and possibly even more. People really get screwed up with this era's growth stocks by comparing them to high multiple stocks in the past. In some cases that works, but the world is simply different than it was in grandpa's day. Many of the high multiple companies of today are essentially infinitely scalable without heavy need for capital reinvestment. Use that framework, add in one of the largest (perhaps the largest) network effects in the history of man, and it's really not hard to see how the company could prove to be cheap at today's prices. You're paying a high multiple of earnings for it, yes, but that's not the best framework to use when looking at it. I fell into the same trap a few years ago as many do today regarding this company. Value investors need to get over sticker shock, because these business models are very different than pretty much anything we've seen before the past dozen years or so. The old metrics and methods of analysis still matter - a company is only worth the cash it can generate its owners over time - but they need to be looked at from a different angle to really get the whole picture. Link to comment Share on other sites More sharing options...
frommi Posted February 12, 2015 Share Posted February 12, 2015 View it in power law terms. If Facebook has staying power (I think it does), the business is not going to generate 2x the revenue it does today. It'll be more like 5x or 6x, and possibly even more. People really get screwed up with this era's growth stocks by comparing them to high multiple stocks in the past. In some cases that works, but the world is simply different than it was in grandpa's day. Many of the high multiple companies of today are essentially infinitely scalable without heavy need for capital reinvestment. Use that framework, add in one of the largest (perhaps the largest) network effects in the history of man, and it's really not hard to see how the company could prove to be cheap at today's prices. You're paying a high multiple of earnings for it, yes, but that's not the best framework to use when looking at it. I fell into the same trap a few years ago as many do today regarding this company. Value investors need to get over sticker shock, because these business models are very different than pretty much anything we've seen before the past dozen years or so. The old metrics and methods of analysis still matter - a company is only worth the cash it can generate its owners over time - but they need to be looked at from a different angle to really get the whole picture. But the online advertising market can`t outgrow the advertising market as a whole. Its already at 25% of the overall ad market, so perhaps in 10 years its at 50%. FB has to get 20-25b in revenue to go up 5 fold in that timeframe from other companies, for example Google. That may be happening, but the problem is that the market is already assuming that this will happen and that 50-60% of this revenue will fall to the bottom line. At current prices all this has to happen to make a 10-12% return. You can build a simple model with your assumptions and test it. Link to comment Share on other sites More sharing options...
rpadebet Posted February 12, 2015 Share Posted February 12, 2015 View it in power law terms. If Facebook has staying power (I think it does), the business is not going to generate 2x the revenue it does today. It'll be more like 5x or 6x, and possibly even more. People really get screwed up with this era's growth stocks by comparing them to high multiple stocks in the past. In some cases that works, but the world is simply different than it was in grandpa's day. Many of the high multiple companies of today are essentially infinitely scalable without heavy need for capital reinvestment. Use that framework, add in one of the largest (perhaps the largest) network effects in the history of man, and it's really not hard to see how the company could prove to be cheap at today's prices. You're paying a high multiple of earnings for it, yes, but that's not the best framework to use when looking at it. I fell into the same trap a few years ago as many do today regarding this company. Value investors need to get over sticker shock, because these business models are very different than pretty much anything we've seen before the past dozen years or so. The old metrics and methods of analysis still matter - a company is only worth the cash it can generate its owners over time - but they need to be looked at from a different angle to really get the whole picture. But the online advertising market can`t outgrow the advertising market as a whole. Its already at 25% of the overall ad market, so perhaps in 10 years its at 50%. FB has to get 20-25b in revenue to go up 5 fold in that timeframe from other companies, for example Google. That may be happening, but the problem is that the market is already assuming that this will happen and that 50-60% of this revenue will fall to the bottom line. At current prices all this has to happen to make a 10-12% return. You can build a simple model with your assumptions and test it. I think this is a very good point. Forecasts for individual companies need to be sanity check'ed against the total market opportunity and the likelihood of them grabbing the assumed portion of that. As a further example, I would suggest AMZN. AMZN has like 25% share of eCommerce retail pie right now....but the eCommerce pie itself is 6-7% of entire retail pie, so we are talking abt AMZN having a paltry 2% retail sales share. If you are looking for a dominant business in its space with a huge runway, look no further. Link to comment Share on other sites More sharing options...
ScottHall Posted February 12, 2015 Share Posted February 12, 2015 View it in power law terms. If Facebook has staying power (I think it does), the business is not going to generate 2x the revenue it does today. It'll be more like 5x or 6x, and possibly even more. People really get screwed up with this era's growth stocks by comparing them to high multiple stocks in the past. In some cases that works, but the world is simply different than it was in grandpa's day. Many of the high multiple companies of today are essentially infinitely scalable without heavy need for capital reinvestment. Use that framework, add in one of the largest (perhaps the largest) network effects in the history of man, and it's really not hard to see how the company could prove to be cheap at today's prices. You're paying a high multiple of earnings for it, yes, but that's not the best framework to use when looking at it. I fell into the same trap a few years ago as many do today regarding this company. Value investors need to get over sticker shock, because these business models are very different than pretty much anything we've seen before the past dozen years or so. The old metrics and methods of analysis still matter - a company is only worth the cash it can generate its owners over time - but they need to be looked at from a different angle to really get the whole picture. But the online advertising market can`t outgrow the advertising market as a whole. Its already at 25% of the overall ad market, so perhaps in 10 years its at 50%. FB has to get 20-25b in revenue to go up 5 fold in that timeframe from other companies, for example Google. That may be happening, but the problem is that the market is already assuming that this will happen and that 50-60% of this revenue will fall to the bottom line. At current prices all this has to happen to make a 10-12% return. You can build a simple model with your assumptions and test it. I account for this in my valuation. I have online ads getting to about 44% of the worldwide ad market by 2029, assuming the worldwide market grows starting a mid-single digits, and descends quickly to low single digits, and have Facebook growing to about 15% of the worldwide ad market at that time. I have EBIT margins growing to the mid-to-high fifties. I don't know about your model, but mine gets me to a valuation of about $120 per share. That amounts to a ~13.5% CAGR, which is fine with me. These numbers probably sound aggressive, and they certainly are. But they're not off-the-wall nuts, either. Google did ~$66 billion last year, top line, so it's not far off that percentage itself (there are other things in there too, but all pretty minor). And it's still growing at around a 20% annual clip. If I had to guess, I'll probably be off to the upside. Interpublic's assumptions regarding digital ad growth as a percentage of the total outstrip mine. Things often change very slowly, and then very quickly. That said, if you question Facebook's sustainability as a platform, then you shouldn't own the stock. If you think it is sustainable, there's a good case to be made that it is very cheap. I think we often underestimate the magnitude of winners and change in markets. Facebook is priced for a great deal of success, but my guess is that it'll be even more successful. Best wishes. Link to comment Share on other sites More sharing options...
Gopinath Posted February 13, 2015 Share Posted February 13, 2015 Looks like Pabrai bought Google this quarter, interesting?? Link to comment Share on other sites More sharing options...
frommi Posted February 13, 2015 Share Posted February 13, 2015 I account for this in my valuation. I have online ads getting to about 44% of the worldwide ad market by 2029, assuming the worldwide market grows starting a mid-single digits, and descends quickly to low single digits, and have Facebook growing to about 15% of the worldwide ad market at that time. I have EBIT margins growing to the mid-to-high fifties. I don't know about your model, but mine gets me to a valuation of about $120 per share. That amounts to a ~13.5% CAGR, which is fine with me. These numbers probably sound aggressive, and they certainly are. But they're not off-the-wall nuts, either. With your assumptions i had similar fair values with my build-in-5-minutes model. But then i realized that when they just grow with the market and don`t get marketshare from competitors fair value is south of 50$, so you don`t have a margin of safety here. And since you own Google too how can you be comfortable with the fact that both are not able to outgrow the online ad market, but have to to get you a return >10%? Link to comment Share on other sites More sharing options...
jawn619 Posted February 13, 2015 Share Posted February 13, 2015 I account for this in my valuation. I have online ads getting to about 44% of the worldwide ad market by 2029, assuming the worldwide market grows starting a mid-single digits, and descends quickly to low single digits, and have Facebook growing to about 15% of the worldwide ad market at that time. I have EBIT margins growing to the mid-to-high fifties. I don't know about your model, but mine gets me to a valuation of about $120 per share. That amounts to a ~13.5% CAGR, which is fine with me. These numbers probably sound aggressive, and they certainly are. But they're not off-the-wall nuts, either. I remember good mentioning that part of owning Google is that it's like having a free(or really cheap option) in a lot of industries. Self driving cars for example. Maybe that would add to the margin of safety. With your assumptions i had similar fair values with my build-in-5-minutes model. But then i realized that when they just grow with the market and don`t get marketshare from competitors fair value is south of 50$, so you don`t have a margin of safety here. And since you own Google too how can you be comfortable with the fact that both are not able to outgrow the online ad market, but have to to get you a return >10%? Link to comment Share on other sites More sharing options...
ScottHall Posted February 14, 2015 Share Posted February 14, 2015 I account for this in my valuation. I have online ads getting to about 44% of the worldwide ad market by 2029, assuming the worldwide market grows starting a mid-single digits, and descends quickly to low single digits, and have Facebook growing to about 15% of the worldwide ad market at that time. I have EBIT margins growing to the mid-to-high fifties. I don't know about your model, but mine gets me to a valuation of about $120 per share. That amounts to a ~13.5% CAGR, which is fine with me. These numbers probably sound aggressive, and they certainly are. But they're not off-the-wall nuts, either. With your assumptions i had similar fair values with my build-in-5-minutes model. But then i realized that when they just grow with the market and don`t get marketshare from competitors fair value is south of 50$, so you don`t have a margin of safety here. And since you own Google too how can you be comfortable with the fact that both are not able to outgrow the online ad market, but have to to get you a return >10%? I wouldn't be at all surprised to see the two of them accounting for >80% of worldwide digital advertising. I could be completely, 100% wrong on this, but I don't think it's near of as insane of an assumption as you seem to. I also wouldn't be shocked to see television advertising drop off far more quickly than the general consensus, but I don't incorporate that. Link to comment Share on other sites More sharing options...
innerscorecard Posted March 11, 2015 Share Posted March 11, 2015 With the likelihood of capital return to shareholders increase? http://bits.blogs.nytimes.com/2015/03/10/google-c-f-o-is-retiring-to-spend-more-time-with-family-no-really/ Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted March 11, 2015 Share Posted March 11, 2015 I account for this in my valuation. I have online ads getting to about 44% of the worldwide ad market by 2029, assuming the worldwide market grows starting a mid-single digits, and descends quickly to low single digits, and have Facebook growing to about 15% of the worldwide ad market at that time. I have EBIT margins growing to the mid-to-high fifties. I don't know about your model, but mine gets me to a valuation of about $120 per share. That amounts to a ~13.5% CAGR, which is fine with me. These numbers probably sound aggressive, and they certainly are. But they're not off-the-wall nuts, either. With your assumptions i had similar fair values with my build-in-5-minutes model. But then i realized that when they just grow with the market and don`t get marketshare from competitors fair value is south of 50$, so you don`t have a margin of safety here. And since you own Google too how can you be comfortable with the fact that both are not able to outgrow the online ad market, but have to to get you a return >10%? I wouldn't be at all surprised to see the two of them accounting for >80% of worldwide digital advertising. I could be completely, 100% wrong on this, but I don't think it's near of as insane of an assumption as you seem to. I also wouldn't be shocked to see television advertising drop off far more quickly than the general consensus, but I don't incorporate that. Where does TWTR, LNKD, Snapchat, others, and New entrants fit in. Either GOOG and/or FB is overvalued or there's a significant bubble. Cord cutting has not been as great as stated and I don't see tv going anywhere. I'm with Frommi that's there's no MOS. I love GOOG but I just can't see returns outside aggressive price multiples (at future mature stage) from here without other profitable revenue streams. Link to comment Share on other sites More sharing options...
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