Go Nasdaq Go!

October was a dreary month indeed but the last day almost made up for 30 days of torture. The Nasdaq was up 1.5% but my internet-heavy growth portfolio was up over 3.5%!

It is not often that you get days like this on the stock market so I am sitting back and savouring the victory. I am not sure exactly why the internet stocks were favoured but "TheStreet.com" did publish an article about some deep internet value around at the moment, citing Verisign as one of the examples, which helped them to a 4% gain.

Google is already up 15% since I bought in again. I am not selling though. It seems to me that people assume that because of Google's amazing run in the last year it must be over-valued. Then they compare the market cap. to other companies who have been around for a long time and have more revenue that Google. Then they look at competition from Microsoft and Yahoo and say Google is worth about $200 a share. As far as I am concerned you only need to look at two metrics to get Google's share price - earnings and growth rate. A very conservative earnings estimate for 2006 is $8. A conservative growth rate is 40%. 8 * 40 = $320. Current price = £370. Obviously investors expect over $8 a share next year. The point is that just because a share costs $370 does not automatically make it expensive. Just because a share has quadrupled in a year does not automatically make it expensive. Google is on a forward P/E of 44 compared to 48 for Yahoo. And which one is growing quicker?

I know that Google cannot always grow at 40% but I don't think the growth will slow below 20% in the next 5 years either.

eBay, Google and Verisign all look well placed for further share price appreciation. Go Nasdaq Go!