Average up! Underdiversify! Win big with Google!

Enough hyperbole.

My decision last year to double up on eBay certainly was not inspired as those shares are now showing a 20% loss, and that is after a significant recovery from the low of $23 last year. What was I thinking of, buying a company on a forward PE of 40 that was growing at 25%? In fairness I thought eBay was growing at 40% and no one can really explain why it dropped so much last year.

So if I double up on Google will that be any different? Well Google is on a forward PE of about 25 and it just grew revenue at 60%. So the numbers look great but what are the risks?

Loss of market share is one I guess but that is hard to imagine as Google has been growing market share for so long now. Even if market share remains static revenues will grow as the online advertising industry expands and Google reaches into new product areas.

A global recession is another risk. Unlike eBay, Google would be adversely affected by a recession as advertising budgets would be slashed. However as Google's sponsored search is so effective it is likely that other forms of advertising would be dropped first.

International revenue is now almost 50% of total revenues so a slowdown in the US economy would not be a complete disaster.

Google is a buy. So it is bye bye to CSR and Dana Petroleum for now and hello to more Google.