Wait for me Google!

In the last few weeks bells and whistles have been going off in my head saying it is time to get back into Google before I miss the next big run up of the stock. Why do I want to get back in?

1) The market seems to constantly under-estimate the growth potential of Google. This has been true since the IPO when almost every earnings release has resulted in a re-rating of the stock. The stock is currently on a forward P/E of about 40. This is high but not that high considering the growth Google is experiencing.

2) Analysts are being reserved about Google. I think some analysts would like to have a $400 plus price target on Google but are too embarrassed to do so as it smacks of 1999. Jim Cramer in a recent article apologetically talked about GOOG reaching $900 in a few years but then went back to the $350 target so as to stay credible. I read another article recently where one economics professor put all Google's metrics into some valuation engine and came out with a valuation of $110! This is so hilarious I cannot believe they printed it! A forward P/E of 15 for a company growing at over 40%? Right.

3) Growth is so cheap. If a retail outlet wants to grow it needs to invest in new stores and new staff - a costly and time-consuming process. Google just needs to keep on providing killer apps and viral marketing will do most of the rest. I do not remember seeing any ads for the Google search engine - I used it because my work colleagues were using it.

Google has already become the web services portal for most people. Considering the speed they are developing new tools I do not see this changing.

So where am I to find money to put in Google? With no spare cash around it was a fond farewell to Big Yellow (UK small cap real estate play) and Frontline (Oil Tankers.) BYG.L have made me a modest profit of about 7%. I am still a big admirer of the business model and the management. Maybe when the P/E comes down I will be able to buy them for my mortgage portfolio. Frontline broke even when the two dividends are factored in. Unfortunately I got in at a bad price but it has been an interesting experiment. I am not sure if I would buy into FRO again. I love the dividends and the management seems strong but I really have no special inclinations about where the oil tanker industry is going.

Now I am just waiting for my sales to settle and the cash to clear. I just wish the Google share price would stop going up in the meantime! Come back here GOOG!