As I mentioned a couple of weeks ago, I recently attended a
conference in Las Vegas, which featured lots of sessions on
Internet-related technologies. I won't bore you with all the
details, except to say that Google was the talk of the
conference. Not surprising really, since the company has had a
major impact on the way we use computers and the Internet since
its founding in 1998.
Google dominates the U.S. online search market, but that's just
the tip of what the company does. From email (Gmail) and photo
sharing (Picasa) to a mobile phone operating system (Android) to
its own Web browser (Chrome), Google truly has its hands in every
facet of our online lives. (The company is so ubiquitous that the
word Google is now a verb!)
Currently, Google is focusing its searches on the local and
personal. You may have noticed that the location you are
searching from appears when you look something up through Google.
And the company is modifying search results based on other things
you've searched for in a bid to provide you with a more personal
I last wrote about
in Cabot Wealth Advisory on September 11, right after the company
debuted its Instant Search feature. At the time, the stock was
trading around 450 and I featured a write-up by Cabot Benjamin
Graham Value Letter Editor J. Royden Ward. It's still in the Wise
Owl portfolio and Roy recommends holding to his Minimum Sell
Price of 887.57.
Since that write-up, the stock has shot up over 600 and is now
trading around 595. And it was also added to the Cabot
Market Letter Model Portfolio on October 20, with Editor Michael
Cintolo writing this:
"Google was a big winner in the middle of the 2000s as it
dominated the rapidly-growing market for paid Internet search.
However, in the U.S., that market is mature; growth in its core
business is solid but not spectacular. So why recommend Google?
Because the company is reinventing itself-revenue from display
and video-related ads (such as those on YouTube, which is
attracting two billion page views per week) and mobile searches
(thanks to its popular Android operating system) are now running
at a combined $3.5 billion annually. There's no reason to think
that these business lines won't become large shares of Google's
pie in the quarters to come. Investors agree-GOOG gapped up 11%
on more than five times average volume last Friday after blowing
away earnings expectations. We think the stock is a good buy here
and expect higher prices. As for the high price of the stock …
focus on the amount of dollars you're investing, not the number
In his most recent issue of Cabot Market Letter, Mike urged
caution, reminding subscribers that the market has basically gone
straight up for the last two-and-a-half months and likely needs
time to rest. But we still believe in the long-term story that
Google has to offer. There's no doubt that the company is still
innovative and has room to grow.
You could buy GOOG here and hope for the best or you could take a
Cabot Market Letter
and get the latest buy, sell and hold advice (as well as
information on our proprietary market timing indicators).
In other interesting news this week, travel search engine
Kayak.com has filed with the SEC to have an initial public
offering in which the company plans to raise $50 million.
Kayak compiles results from travel websites in one place, so you
don't have to search Expedia, Orbitz and Priceline.com, among
others, to find the best deal on flights, hotels and more. I've
used Kayak many times to book flights and found the service quite
The company's SEC filing provided some interesting statistics,
Kayak's revenues grew 48% year-over-year to $128 million for the
nine months ended September 30. And the company's revenue in the
third quarter alone, which also ended September 30, grew 80% from
last year to $48 million.
Kayak performed 469 million searches in the first nine months of
the year, up 37% from 2009. And Kayak's mobile application has
been downloaded almost four million times since March 2009.
Nearly 19% of Kayak's revenue for the year came from Orbitz,
while 25% came from Expedia. Google supplied 8% from advertising.
Kayak does face some challenges. Currently, it depends on a
third-party, ITA Software, to query airfare results. Airfare
searches make up 85% of the queries performed on Kayak and ITA
supplied information for 42% of those searches this year.
The problem is that Google is trying to buy ITA, and if it
succeeds, Google could create its own flight search tool, which
at the least, would create some hefty competition for Kayak, and
at the worst, could cripple the business.
Either way, we generally don't advise rushing into IPOs. We
recommend letting the stock get its legs for a few weeks; if the
stock can build a sound structure on the chart, and if the
fundamentals are enticing, we may then go ahead and take a stab
If you are looking for a stock in the travel arena though, I have
one for you today:
, which was recently recommended in Cabot Top Ten Weekly by
Editor Michael Cintolo:
"Priceline.com remains one of the handful of liquid (i.e., very
well-traded and institutionally owned) leaders of this bull move,
and the reason is obvious--business is very good and continually
outpaces even the most bullish forecasts. Last week, the company
continued that trend by putting up another round of outstanding
numbers, and the under-the-hood metrics were also
impressive--gross travel bookings leaped 47% from the prior year,
international revenues surged 67%, hotel bookings leaped 54% and
the firm's newly-acquired rental car unit sales nearly doubled!
Domestically, growth is slower but steady, and management has
been pushing all the right buttons in positioning its brand
around the world. Analysts significantly hiked their outlooks
following the earnings report (next year's earnings estimate is
now $17.53 per share, up from $15.45 one month ago), which would
mark a healthy 33% hike from 2010. We like it."
"PCLN hasn't gotten many headlines and the stock isn't the
hottest thing on the planet. Nevertheless, shares remain in a
firm uptrend, and have barely had any hiccups since the summer.
Last week's earnings gap was solid-shares rose 8% on nearly
triple average volume-but not so powerful that we think it'll be
all up from here for PCLN. A pullback of a few percent is
possible, and would be buyable if it comes."
Click here to learn more about PCLN and other leading stocks
Cabot Top Ten Weekly
In this week's Stock Market Analysis Video, Cabot China &
Emerging Market Report Editor Paul Goodwin says that the general
trend of the market remains up. Paul also talked about the
importance of being in-step with the market itself, which can be
accomplished by using Cabot's market timing indicators. Stocks
), Ford (
), Riverbed (
), Freeport-McMoRan (
) Salesforce.com (CRM), VanceInfo (VIT), Focus Media
. Watch the
Stock Market Analysis Video
Until next time,
Editor of Cabot Wealth Advisory