Google Finance Is Finally Here

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March 21, 2006 | Others | Author Asif

Google’s name is synonymous with information and it should come as no surprise that Google (GOOG) would also want a piece of the financial news pie. This morning Google launched Google Finance. The design looks clean and all the panels that show up when you lookup a stock are similar to Google News. Some cool features include the display of blog postings that are related to the stock you are looking up and the presentation of all the information on a single page. The “Related Companies” section appears to display a whole lot more companies when compared to Yahoo Finance’s “Competitors” section. However when I looked up the related companies for SINLetter picks VA Software (LNUX) and Medifast (MED), the companies that showed up were all across the spectrum.

The decision to tie Google groups to Google Finance as an alternative to Yahoo Message Boards is a welcome one. Hopefully they will not get inundated with the mindless chatter or political bickering that is often seen on Yahoo Message Boards. At the end of the day I still feel that Yahoo Finance with its wealth of information and familiarity will continue its reign as the king of financial websites.

Check out the reaction of other finance bloggers on the Internet Stock Blog.

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SmartMoney’s Strange Market Madness

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March 7, 2006 | Others | Author Asif

SmartMoney launched a new stock-picking contest where you go through five rounds (similar to basketball playoffs) and a final championship round to win a Sirius Satellite radio and service. While the prize does not amount to much, the winner would certainly have bragging rights. They also do not let you choose your own stocks and you have to pick amongst the stocks they have pre-selected. Stocks are classified into various categories such as Growth, Value, Income and International. I was happy to see SINLetter pick Tata Motors (TTM) amongst the international stocks that they have pre-selected.

There are certain strange things that I noticed about this contest. Mixed amongst the stocks is a fund like EFL, which is an emerging markets bond fund. Another really odd thing is the categorization of stocks. Stocks such as Yahoo (YHOO), Google (GOOG), EBay (EBAY), Apple (AAPL) and Genentech (DNA) fall under the “Value” category while stocks such as Pfizer (PFE), Merck (MRK), Sara Lee (SLE) and Citigroup (C) fall under the “Growth” category. Warren Buffett once remarked “Growth and value investing are joined at the hip”. Keeping that in mind, I still cannot see how this categorization makes any sense. I get the feeling they switched the categories by mistake or a machine picked the stocks. The income group looks fine except for the presence of U.S Steel (X) with its 0.7% dividend yield.

If you would like to try your hand at picking stocks, check it out here (registration required).

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Can Twisted Logic Trump Income Investing?

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March 2, 2006 | Others | Author Asif

In a word, yes. If you are wondering what I am rambling about, stay with me a moment. I came across an article on Yahoo Finance yesterday called Growth Strategy Can Trump Income Investing by Juan Carlos Arancibia. I was drawn to this article because most studies have shown that over a long period of time, value investing usually trumps growth investing. Since income investing is a close cousin of value investing, I figured Juan might have some compelling arguments to make.

The article starts out with the following statement “The idea behind income investing sounds logical: Buy bonds and dividend-yielding blue chip stocks, and live off the guaranteed income.” and then goes on to offer reasons as to why growth investing offers better returns when compared to income investing. To make his case, towards the end of the article he lists 20 high yielding dividend stocks and shows how all of them except 2 have performed badly over the last year. There are four major flaws with this reasoning.

  • None of the stocks in the list are blue chips. If the list had included blue chips like AT&T (T), Boeing (BA) and Procter & Gamble (PG), the results would have been completely different.
  • When dividend paying stocks fall, their dividend yield goes up. Stocks with very high dividend yields normally set off red flags, as more often than not, there is something wrong with the company (unless it is a REIT). Serious income investors tend to stay away from such stocks.
  • These 20 stocks represent the bottom of the barrel. This would be similar to comparing Johnson & Johnson (a SINLetter pick) and AT&T (T) to failed biotech and tech stocks, claiming that income investing is better than growth investing.
  • Income investors usually have a longer investing horizon and comparing returns over a one year period may not make sense. Even the worst performing stock on this list, Knightsbridge Tankers (VLCCF) is up slightly over a five year period. With a five year average dividend yield of 16.60%, one could argue that even this stock has outperformed both the Dow Jones Industrial Average and S&P 500 by a wide margin.

While I am a value investor at heart, I have nothing against growth investing and have featured growth stocks in some of my previous investment newsletters. I wanted to play devil’s advocate with this story so that impressionable income investors do not switch strategy mid-stream based on the conclusions of this article. I invite the author to post his comments and carry this discussion further.

Voluntary Disclosure: At this time I do not own positions in any of the stocks mentioned in this blog posting. Nothing in this blog posting should be considered as investment advice or a recommendation to buy or sell securities.

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Guess Who’s Back?

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February 16, 2006 | Others | Author Asif

For those of you who invested in the stock market through the dot com bubble, it would be of interest to note that the ex-Merrill Lynch analyst Henry Blodget is back and is now blogging on a website called the Internet Outsider. For those of you who are not familiar with Henry, he was often known as the “poster boy” of the internet bubble and rose to fame after making a call that Amazon.com would hit $400 per share, which it promptly did. After the bursting of the bubble, much of investor anger was directed toward Henry and Mary Meeker, another analyst who covered internet stocks at Morgan Stanley.

Kaushik Gala is also back and blogs at his very creatively named website GalaTime.com. Kaushik used to blog about options trading while he lived in the US and garnered quite a following. He moved back to India and relaunched GalaTime in January 2006 with a focus on the Indian stock market. A highly recommended blog.

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Out Of The Google Sandbox

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February 11, 2006 | Others | Author Asif

I am finally out of the much talked about “google sandbox” and what an exit it was. I landed straight on the first page of Google search results for the coveted search term Stock Investment Newsletter. If you are not a SEO (Search Engine Optimization) expert who spends most of his or her time trying to improve the rankings of client websites on various search engines, then I owe you an explanation. Many websites depend on the traffic they get from search engines to generate a large part of their business. Obviously Google is the 800-pound gorilla in the search engine market and usually sends the most amount of traffic to websites that rank high in its search results. Yahoo and MSN also seem to be gaining traction these days from what I have noticed in my logs. As for the term “google sandbox”, it is used to describe google’s behavior of originally ranking new websites high for competitive search terms such as “stock investment newsletter” and then altogether dropping them from search results for many months. The general consensus is that your website gets dropped for about 6 months.

There are many theories as to why this happens and some people do not even believe that such a sandbox exists and attribute it to SEO folklore. After having my website show up on page 1 (and sometimes page 2) on both Yahoo and MSN while being conspicuously absent from Google, I can tell you that it is very much real. My banishment lasted exactly 4 months and 11 days. Some people claim that the google sandbox was created to keep spam websites from showing up high on search engine results as they often employ aggressive linking strategies through the creation of multiple websites that link to each other. However during this sandbox period, I still continued to receive the maximum amount of traffic from google through search terms that were not highly competitive. For example I did show up on page 1 and often as the first result for the terms Chipotle Investment, Wipro Stock Split 2005 and SINLetter.

Search engines constantly tweak their algorithms to foil SEO consultants that use unethical methods to bump up the rankings of client websites. It is entirely possible that I am out of the sandbox because of big changes at google that were supposed to go into effect in February or March of 2006. Whatever the reason might be, I certainly do not want to see the inside of a sandbox again.

Update April 13, 2006: After a brief stint outside the Google Sandbox, I am back in it again thanks to a phenomenon called Google Bowling. Some of my content is published by the Seeking Alpha network of financial blogs and in late February they updated my profile with a link pointing back to SINLetter. The keywords used for the link were “investment newsletter”. However I did not realize that they published my profile simultaneously on multiple websites that form a part of their network, creating multiple incoming links to SINLetter.com at the same time. Within a day of this happening, I disappeared from Google search results for competitive search terms like “investment newsletter” and have not seen the light of day since. This second banishment into the Google Sandbox has already lasted over six weeks and I can’t wait to exit the sandbox once again.