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Hi All,
As we all know, the stock market can be irrational at times. However, this irrationality can present wonderful opportunities if you are paying attention. I believe that I have found 1 of those opportunities that come around a couple of times per year. Let me give you my elevator pitch.
This is a stock that I guarantee all of you know about. The stock I am looking at is Google (GOOG).
I've seen this opportunity play out a number of times with major companies this past year. Let me walk you through a few examples of the past before we look at the opportunity of the present:
This past November, META (Facebook) hit a 52 week low of $88 per share. This came on the back of fears that META was spending too much money on the metaverse at the same time their core business (Ads from FB, Instagram) was softening a bit due to a slower economy. This caused shares too sell off way too hard. It brought META down to extreme value levels. For those who could see past the noise and realize that this was likely a cyclical issue and that META would recover beyond the current share price there was extreme opportunity. In the following 3 months, META went from $88 per share to a peak of $192 per share. This wasn't some crazy penny stock or junk company. META has a ton of cash and cash cow businesses attached to their name. Buying at $88 was a playout of the classic Warren Buffett advice "Be greedy when others are fearful" All the while trusted valuation metrics put META at a fair value estimate of $260 per share. Those who remained rational realized the opportunity.
This January, TSLA (Tesla) dropped to a share price of $102 per share. This coming off of fears that Elon wouldn't be focused on the business due to acquiring Twitter. Elon had to sell a bunch of stock to complete the Twitter deal and a lot of institutions sold with him. This triggered TSLA falling from $300 per share to $102 per share in 3 short months. Those (including myself) who paid attention knew that this was far too cheap a price for what TSLA is doing. In 6 short weeks, Tesla has recovered from $102 per share to $213 per share. Another 100% gain on shares. Valuation metrics put a fair price on TSLA of $220 per share. Once again, those who look past the short term noise were able to profit nicely from the market's irrationality.
This brings me to the current moment. I have initiated a position on Google yesterday afternoon @ $94.13 per share. Google has a fair value estimate of $154 per share. and has sold off down to a low of $92 on Tuesday. I think markets are being irrational once again on one of our big tech companies. Google's bread and butter is their ad revenue from Google search and YouTube. The ad market is cyclical and has softened due to the economy. Make no mistake, GOOG is still the king and dominates this sector. Meanwhile, their GOOG cloud service is growing rapidly and will produce significant income for the business sooner than later. Most recently, their AI product that is competing with ChatGBT has some errors as they were testing it out. Google lost an amazing $100+ billion in value for these simple issues.
Once again, this is a case of people losing sight in the short term and not realizing what a global power Google is. I don't think it has quite a severe rebounds as Tesla or Meta, but I think we are once again in a low risk/high reward scenario for those who buy Google shares at these prices and give it time to recover. Just a short week ago the stock was priced at $108 per share and moving up. I've grabbed my shares and even bought a few options that are a few months out. I think these will age well. If you have questions about this, lets talk about it in the chat!
You need to do your own research. This is not financial advice. This is meant to generate ideas for you. I think this is a high value idea that presents similar opportunities that we've seen in the past. Please invest responsibly.
-Caleb
