Investing -- Buy or Sell Google?

Observations from a former cab driver

I used to drive a cab in Somerville / Boston in the 1980s. It was the era when the FBI’s most wanted man was Whitey Bulger, boss of the Winter Hill gang, and immortalized in the movie “The Departed.” Whitey had most of his operatives in the Irish- Catholic strongholds of Charlestown (Charlie town), Chelsea and Somerville. These were also the immediate Boston suburbs where I picked up or dropped off most of my fares .

The number three taxi stand was across the Star (Stah as in Lobstah) Market in Winter Hill, Somerville . The “white” projects down the hill teemed with people with missing teeth, oily hair , and were my frequent riders. There was no question in my mind that these projects ran all kinds of criminal activity.

And yes, and I was threatened several times for not being white. Once ,a surly, coked-up, mean-eyed teenager in a gang of three, had to be held back by the other two when he saw me, a fuckin “fill in expletive” handling his two pizzas .

Taxi-driving is full of risks. Not only was I driving around crazed Boston area roads with unduly numerous one-ways, narrow lanes, and ludicrously creative and aggressive drivers, but I could be knifed at any point.

After two years of driving I escaped, luckily, with no scrapes on body or car. Yet , within these two funky years, I learned how to take calculated risks. For cabbies, time is money, and every green light matters. So, I drove fast but defensively which is no contradiction. Driving fast still means that you keep your distance, watch your mirrors every five seconds, and learn how to anticipate the potential actions of others. Courtesy helps , as does avoiding tailgaters and large trucks.

Investing too entails taking on risk. The risk spectrum is naturally wide. So, when we inherently calculate our own risks, we use both our gut feelings and quantitative analysis. To reduce my reliance on “gut feel” I only invest in information technology . I’ve been a student and practitioner of IT for 40 years now. I’ve seen the rise and demise of Digital Equipment Corporation and Wang Computer , Atari and Tandy, and Novell , Sun Microsystems, Netscape, and AOL. But we can’t let these failures deter us.

Like professional drivers, us investors must be ever vigilant, constantly surveying the landscape for technology leapfrogging that will ensue, which brings me to Google, one my core holdings.

Just yesterday a Senior VP at Apple in a public court hearing noted that Google searches have dropped by 20%. This has clear implications for Google’s loss of ad revenue. But is it enough to sell my position? After churning through my gut to get a feeling , and then running the numbers, I decided I am not selling Google. Why?

1. The valuation is at rock bottom, (P/E is at 15 – compare this to MSFT at 33)

2. I’m betting on even bigger stock buybacks than previously announced

3. A larger cash dividend is likely – this will juice the stock price

4. Antitrust issues will fade again as Google will fight to the end . So, no divestments as this will be tied up in court for at least a couple of years. This is a positive not a negative.

5. Google is a leader in AI. Brilliant stuff is on its way.

6. YouTube is killer and a money machine – lots of room to grow

7. Google Cloud will make gobs of money

8. Waymo is awesome ( Elon is far behind and eating dust despite what comes out of his measly mouth) )

I’m bullish on Google. Are you ?