3 Reasons why you should sell your Google stock — Now.
I have run my retirement portfolio for 20 years. Roughly 2 hours a day over that time I have spent studying, reviewing, learning about the markets and their eccentricities. “Company makes money, it goes up, loses, it goes down”.
That would be wrong.
To try and comprehensively explain the stock market in 1 article is to try and hike to Hawaii — it’s just not going to happen. I could do 10,000 words on Amazon or Tesla but it's easier to explain witchcraft to my dog. Amazon makes no money but is the richest company in the world and Tesla has 4 profitable quarters in 15 years. Tech has changed the world and nothing more so than the markets.
What I studied regarding ‘how you value a company’ in school is gone. You now have sentiment as important as hitting financial guidance. Which brings me to Google. Google makes a shit ton of money (per SEC filings, a shit ton) and you use it every day. Think about that saturation? What company in the US can you absolutely not avoid? Android is 75% of the global phone OS use. Browser market share? Chrome 66%. Search engine — try Google controlling 80% of the global search market. But, hey old news right, streaming is where it’s at. Youtube has only 75% of the global streaming market. Vimeo is #2 with 18%.
That is unprecedented market control. Even the Dutch East Indies had the English East Indies Co. to counterbalance its global dominance. Not to get off-topic, but both companies ended up being “unwound” due to corruption. Which happens a lot in history as companies get too powerful. Facebook, cough cough.
Allow me to put all those numbers into perspective. We used to have cable which made enough in adds and subscriptions to keep 60–70 different cable networks afloat. Newspapers, which were cornerstones of cities and supported 1000’s of people from writers to paperboys are already dead. Quick history lesson for millennials, ever heard of a thing called MA BELL? It was such a massive deal Congress broke it up in 1984 as it was a monopoly.
The good old days, when we had oversight.
Well, Cable has lost upwards of 70% of its ad sales (and cord-cutters have cut) to Youtube and FB, (predominantly) given targeted adds vs Nielsen ratings I can’t imagine that number doesn’t grow. Newspapers and magazines are just institutions that make their money on web or by fee’s from FB or the like. Just old business models that are holding on to nostalgia basically. And although people in some 3rd world countries think Facebook is the internet, the device they access the miracle of Facebook with is an Android device 80% of the time.
So….Why would anyone want to sell a stock that at worst appears to be about to split? There are 3 reasons…..
#1 — A stock’s value is all about growth.
Now I’m sure they will burn through a ton of cash buying the next Ring, Nest or whatever, but historically buying companies is an expensive way to do R&D. Ask Microsoft about Nokia. How many adjustments to Gmail can they do otherwise? Certainly, some companies have established groundbreaking products and evolved into entirely other businesses over time. GE was lightbulbs 110 years ago, 40 years ago they were a bank who made jet engines, of course, now they are a penny stock. So evolution is key, but it's hard. Google has a gigantic footprint and has a lot of mouths to feed.
Google is so massive and dominant in so many businesses they are close to maxed out. In fact, I would make the case they are one clever person away from making a rival search engine or someone with some cash to do a less alienating job than Youtube does posting videos — away from having some market share sucked out of the valuation. They already have to be very careful to avoid angry politicians using them as the bad guy to get reelected. Compared to FB I’d say they are pretty solid citizens, but after listening to the political right attack social media because they have been “treated unfairly” I have no faith in their integrated independence long term.
#2 — Where Google fucked up.
Google does two things very poorly; They discontinue things at the drop of a hat and their customer service is jaw-droppingly terrible. Let’s mesh those two together using their product Google Fi.
I have Fi. It rocks, it’s inexpensive, works as well as any other service (better than Sprint for half the price) but god forbid you have a non-linear problem. It’s not Google docs or something, people need their phones for safety, security etc, if there is a problem with something 45 minutes of combing message boards for an answer isn’t practical. Not just for older American’s, not just for those who are less “tech-savvy”, when you have 70% of any market you get diversity. Act like it.
Do you know any successful Youtubers? I bet they hate Youtube. Statistically, 80+% of the most successful Youtubers can’t stand the company. The algorithm is inconsistent, videos are demonetized without explanation, and the adds are becoming intrusive. What does that mean? It means Twitch or Daily Motion could do to Youtube what Walmart is doing to Amazon very quickly. Hell, I could put a business plan together to transition influencers in an hour.
#3 — I don’t see how it doesn’t get broken up (to some extent) in the next 4 years.
Pam Warren has already said it publically. Most big tech either breaks or straddles the line of Anti-trust anyway so its a strong legal position. Europe already has decided to employ anti-competitive measures and China is trying to force them to contort in the exact opposite way. You can’t make everyone happy and Sundar Pichai is realizing that the hard way.