Months ago I bought stock in Google, back when it was around $200 per share. I couldn't afford much, but I got what I could. I rode it up to over $300 per share. All along the way I tailed it with a STOP order to protect me from outrageous losses in case it should fall. A week or so ago it fell back and set off my STOP order at $275. I wrote about it and then thought about it and then decided to buy back in. And I wrote about that, too.
Now I'm thinking about this more thoroughly. Google's big boys at the top have done some interesting things.
First of all, they have announced that they are issuing more shares of stock, which slightly devalues the existing shares. This is an odd thing to do. Why would they do this? They said they don't have any specific plans for the extra money the sale will generate. They just want to do it and stash the money away in case they should ever need it.
Second, and perhaps most importantly, the insiders at the top are selling their own shares of Google stock. Why does this matter? Because it tells you what they think about the current price of the stock. When the big boys think their company's stock is undervalued they buy it back. But when they think it is priced about as high as it is going to go they sell it and make some money. They have been selling their shares for several weeks now.
While all of this is going on most stock analysts are saying Google is gold and we should all buy, buy, buy. A select few, my own broker's advisors included, are saying Google is riding a bubble and is way overpriced. They say sell, sell, sell.
Stocks experts in the media are just like all the other media experts. They are only experts because the media says they are. What exactly qualifies a person as an expert is difficult to define, much like 'sex' and 'family' can't be defined by Bill and Hillary Clinton even though it seems as if it should be obvious to many of the rest us.
Last Friday I was looking at my money situation and trying to find a way to raise more cash to invest in Google stock. As I did so I watched it rise to nearly $300 per share, making me feel like I had missed out because if I had just jumped on it without thinking first thing that morning I could have made several dollars per share in that same day. But I finally decided not to buy. I wanted to think about it.
So I am sitting on this Google stock I just rebought and I am thinking back about a year to when I bought Redhat. I checked with all of the 'experts' to see if they agreed with my opinion that Redhat was gold and going to bring Microsoft down to its' knees. They all agreed. Redhat is gold, they said. So I bought it near its' 52 week high, breaking a cardinal rule right off the bat, and almost immediately resold without even knowing it when the stock fell like a dead bird from the sky and hit my very, very liberal STOP limit which I had set almost as an afterthought. It continued to fall well below that and made me glad I had sold even though I lost a lot of money in the process. I could have lost twice as much.
I think I'm going to set another STOP on Google and I'm going to be fairly intolerant with it. I'm going to set it high. If Google falls much then I'm out. And then I think I'll stay out for awhile.
I made a fundamental error with Google. I never set a price that I wanted to sell at. I just decided to ride it to the top, which is a number no one can know in advance. I tried to compensate for that by keeping a STOP limit under it to protect me from having the stock fall too far from its' peak. That does work, somewhat, but large fluctuations in price such as a company exactly like Good is prone to will kick you out prematurely. Generally you should have a price in mind that you intend to sell at right from the start. If I had simply decided to sell Google at $300 per share I would have made my money and been done with it by now. But I didn't. I had figured on being a long term investor in Google and riding it for years. That's fine, but when a stock rides a bubble it's better to just get off at a relatively high point and then get back in later when it's more reasonably priced, rather than trying to ride the bubble all the way to the top.
I already thought something was odd when Google never announced plans to split their stock after they went over $300 per share. At that point, if the leaders of a company feel the price is fair, they'll almost always split or at least offer some explanation as to why they aren't splitting. Google hasn't said boo about it. And then, with all of them selling their own shares, I think the writing is on the wall. They think it's overpriced and they are quietly cashing in as fast as they can. I think I probably need to get out, too.
Also
In the past I've mentioned a high-flying REIT with the symbol ALX several times. It keeps going up and up, so naturally it keeps getting my attention. It's flying high again this week and I was wondering what is going on. Happily, they just released their latest financials.
The financials look spectacular. At first. Their earnings have leaped like a cat being surprised by a barking dog. But when I looked closer I noticed that most of their dramatic increase in earnings comes from one-time-only sales of properties. This bothered me, as it means nothing towards long-term growth. So I kept digging around through all the info.
I noticed that all of the big boys are selling their holdings in this REIT. Absolutely no big buyer is buying at all. It's not just company insiders who are selling, but the mutual fund managers, too. This is a BAD sign.
So, I'm holding off on doing anything with this one. I'm just going to keep watching it. I'm not putting money in it unless I see something that makes me think it is a lot more solid than I think right now. Something stinks with this.
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