Sunday, March 2, 2014

"You have been selected for a 5 year mission away and you have to make a 5 year long term investment decision. Do you buy 10 ounces of Gold or do you buy 10 shares of the common stock of Google?"

Dow Jones Industrial Average 16,321.71  (UP) Week ending 02-28-2014

How you answer this question will tell you a lot about whether you are a growth or value investor and about your general investment philosophy.

Do you buy the 10 ounces of Gold at the current COMEX price fix of $1321.60 an ounce?

Or............. Do you purchase 10 shares of Google stock priced currently at $1215.65 per share? You cannot make any changes for 5 years once you make the decision because you will be away.

There are many ways to look at these choices. 

You know that $1,896.50 per ounce on the morning of September 5, 2011 was the all time high for GOLD, so Gold here appears to be at a value based on that price at 66% of that value. But if we continue to have a deflationary economy and housing prices stay stagnant, gold could go down lower from here. On the other hand, all this monetary stimulus by the US Federal Reserve to pump up the economy could de-value the US Dollar by adding too many dollars to the money supply and Gold could become the safe haven and increase dramatically in value. But Gold is a commodity, and it cannot have growth like a company with Cash flow and profits to reinvest and compound.

So what about Google, (Symbol GOOG, $1215.65)? 

Anyone I talk to says Google has run up and is expensive here at this price.  So here are the facts on this muscular company. First, you should know that Google went on a hiring spree and hired all the smartest people coming out of college from all over the world. It was like there was a sports "draft", and they got all the draft picks. So here we go.

GOOGLE had a 1 year, trailing twelve month percentage change in the stock of 50.79% and a 3 year TTM percentage of 98.18%. Formidable numbers.

 The PEG ratio is 1.61 to 1.84% depending on your source. The Return on Equity is 16.30%. The company at the end of 2013 had $72,886 Billion dollars in Assets with $59 Billion of that in cash. The current ratio, (ratio of assets to liabilities), is 4.582 to 1.

I think I am leaning towards Google for my 5 year investment!   Google Search advertising, Google Fiber, Google Glass, Google new robotics company, Google diagnostic medical products, Google Android, YouTube, the Blogger that I type on as we speak here, Google, "only God knows what the blazes is currently in their R & D laboratories", these are the growing branches of a great company.

Google is projecting 2014 earnings per share of $52.71 and 2015 earnings of $62.67 per share, (a forward PE of 19.29). 

GOOG had 2013 Revenues of 59.88 Billion dollars. The company earnings rating in Investor's Business Daily is in the 89th percentile; amazing for a company of this size.

So the 5 year contest will be on total percentage gain in the investment as of 03-02-2019. God willing, we will all be here to come back here and review the results.

So, when he takes off on his Virgin Airlines 5 year expedition trip to MARS, Freewilly will officially throw his money in on the capital growth company common stock of 10 shares of Google.

What will you do with your money and why? Please comment below. We would be glad to hear from you. 

See you on MARS!


1 comment:

  1. Again, as we were discussing over the phone today, I don't think enough companies, regardless of the product or service they provide, think about the "business side" of their business. They don't hire like a draft pick. And secondly, the use of Google in everyday life is overwhelmingly evident. As I mentioned, my co-worker literally depends on it. Bottom line: is google as long-lasting as gold?