Why is it a Good Idea to Invest in Google?

by Tony Chung on November 8, 2006

After a long chat with my buddy Kevin last night, I purchased two shares of Google (GOOG).

Why?

I ask you: why not? :) Yes I understand that Google is nearly $500/share right now. But Kevin had me convinced. He has a good argument. All of us investors at one point or another consider purchasing Google. But it just never seems the right time, either it’s too high or … it’s too high.

Kevin’s argument is that a company like Google is comparable to Berkshire Hathaway (BRK-A) in that significant growth occurs over a very long period of time. From Wikipedia,

The Company (Berkshire Hathaway) averaged a phenomenal 25%+ annual return to its shareholders for the last 25 years while employing large amounts of capital and minimal debt.

Fact: Berkshire Hathaway was in the $5000/share range back in 1990 and at the time of this post, its stock price is $106,875/share.

Yes you heard right:
$106,875 / share!

Let’s say I had two shares back in 1990:

2 shares x (106,875 – 5000) = $203,750 profit in sixteen years

(about $12,734/year gain)

safe_image

Berkshire Hathaway Stock Price, 1990-2006

Is Kevin suggesting that people who invest in Google now will be rich off their asses ten years down the road? No. Well maybe. But if you think of it as a CD account, what is there to lose? That is, if you believe that Google’s around to stay for awhile and that it will sustain/increase its power and success, it doesn’t hurt to drop half a grand of your next paycheck into the Google machine. Let it sit.

Part of this is gut feeling, investing in a quality product that you and your friends use frequently. For people in my generation, Apple, Google, YouTube, Facebook.. these guys all fit the parameters.

*These are just personal opinions, no recommendation has been made in this post.

{ 1 comment… read it below or add one }

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