We are off to a great start again this year with our stock picks and as I mentioned yesterday, I will be closing off the trade on Apple (AAPL) and Blue Nile (NILE) later this morning which leaves us 2 free spots for new trades. So today, we will be entering into one trade. Our average trade currently returns over 13% so far this year, well beyond our goal so for now we can only work hard and hope things keep up. Many will be surprised to see this trade, not because I am going long Google (GOOG) but because the company that I’ve been increasingly positive about, AOL (AOL) will be on the short end of this trade.
Before going further, here are the main numbers that we looked at:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Trend Analysis
AOL AOL Inc 21.22 -7.34 26.74 14.59 (13.16) (25.81) 3.13 21.43 -90
GOOG Google Inc 624.5 26.69 23.44 15.49 3.78 23.98 4.61 144.53 75
The trend analysis score favors Google (GOOG) in a big way and to be honest I’m a bit surprised at how one sided the competition is!
Last week I explained why I still believed that having Larry Page at the very top was bullish for Google but also mentioned that it was unclear how things would go in the short term. I’m a bit worried about investors staying away because of the lack of clarity and information but we will see. Having Google trade at a forward P/E ratio of 15, more or less the same as AOL screamed trade opportunity. Google does have its challenges but overall the company’s perspectives still look solid. I certainly hope that Larry Page will execute a few of the things that I had said I would do if I were Google’s CEO but
Don’t get me wrong, I’m a big fan of what AOL has been doing in the past few months, especially their recent acquisition spree and I think buying the Huffington Post was brilliant (as had been the smaller purchase of TechCrunch) as was putting Mrs Huffington in charge. I was full of praise in my post about being AOL CEO Tim Armstrong for a year. That being said, this trade is being done on valuations purposes only and from that perspective, AOL looks very expensive. The company comes from very far, still is seeing declining revenues and to have an almost identical P/E ratio as Google. I did honestly think I would go long AOL soon but that trade was not there, it will have to wait a little.
Just take a look at the charts for both companies:
Disclosure: I do not hold positions on either stocks