Nyquist Capital

Barrons, subscription-free for the week, has a well-followed and discussed article on Google (GOOG).

I don’t particularly care for Google products, I don’t like the valuation of their stock, and I hate the smarmy attitude the founders have. People who say “Trust Me”, or “Don’t Worry, I am a Man of God” immediately put me on the defensive. When a company comes out and says “Do no evil” you can see why I get concerned. From the Barrons article:

Google’s business has tremendous leverage — changes in revenue, in either direction, have outsized impacts on the bottom line. That’s the result of high profit margins: 88% of net revenue and 58% of gross revenue.

Translation- an an investment Google is highly susceptible to external variables.

There are just way too many variables out there that could impact Google’s success: Aggresive ad pricing from Yahoo (YHOO) and Microsoft (MSFT), content providers de-listing themselves from the engine and going direct to consumer, the potential for a ‘bubble’ in Adwords pricing, click-fraud, Darknets, etc. There are so many different risks and ways for this company to explode to the upside or downside that anyone who tells you they have it all figured out is full of it. Luck is going to play a big role in how fast Google grows.

Read the Barrons article, it is a fantastic piece of financial journalism.