Thoughts on a crazy end of day (BP, GS, GOOG)

By: ispeculatornew
Date posted: 07.16.2010 (4:41 am) | Write a Comment  (3 Comments)

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Yesterday seemed like a down day and that was explainable by yet another set of negative economic numbers which results in a major drop of the S&P500 early on. Going into the close, there was certainly nothing positive to cheer for but at 3:30PM, the market started gaining, and it did so very fast as the market gained over 1% in a half hour. In itself, that is not so exceptional but the fact that it had not been caused by general market activity but rather by two big news was the most interesting.

British Petroleum (BP)

First off came news that BP’s latest attempt to stop the flow of oil was looking good. While the company cannot give a final verdict yes, news has certainly been very encouraging that the flow that has lasted for 3 months now might finally be over. I’m not certain why the stock did not gain earlier as we knew that the operation would take place and we still do not know if it has been successful. It seems like many investors were anticipating more delays and simply seeing BP go ahead with the operation was seen as great news.  We had discussed buying BP a few weeks ago with the stock a bit lower at $36.50. Today’s trading will be interesting as we should see the stock rising if the test continues to go well.

Goldman Sachs (GS)

Then came news of a press conference by the SEC. Traders around the world either knew thanks to inside knowledge or simply predicted that it would be about Goldman Sachs and its rumored settlement with the SEC about the fraud charges. The stock gained big time and will probably have more growth in it this morning as the news is now confirmed. Goldman Sachs has agreed to pay $550 million in order for the SEC to drop all charges. I personally think that is great news. There would be no winners in dragging this on for years, it would simply bring more uncertainty to what is generally considered the most important American financial institution. That means a big big relief for Goldman and its CEO Lloyd Blankfield (who will keep his job apparently)

Google (GOOG)

It was also a great time for Google as it neared the 4PM close, traders bought in to what was rumored to be a surprise earnings report. The stock gained momentum and every time that happens, it tends to make others join in on the action. If the stock is jumping ahead of earnings, that means that some insiders know Google’s earnings will be very solid right? WRONG. At least in this case. Google announced earnings of $6.45 per share, a miss of $0.07 compared with estimated and maybe even higher when we take a look at after hours trading where the stock traded down to $473!!! The earnings are 24% over last year and revenues actually beat estimates by a significant margin ($5.09B vs estimates of $4.98B) but the major unexpected news was seeing costs increase so much for Google. I listened to the earnings call and was happy with what I heard. They are investing in businesses such as Android where they think future growth will come. Looking at market share and growth in different segments, I would say that the growth is still there, just not financial growth… for now. So yes, I am personally still a big time bull about Google and no it is not simply because I fell for Google!

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  1. Comment by The Financial Blogger — July 16, 2010 @ 9:32 am

    so, would you buy BP, GS or GOOG if you had liquidity?

    I like GS and GOOG. I’m not too confident on BP considering we don’t know the final impact of the breach (and if the problem is solved for good!)

  2. Comment by John — July 16, 2010 @ 10:33 am

    That’s incredible. Yeah a big relief for GS.

    SEC said that the penalty was the largest ever imposed on a financial institution… and leaves the door open for future civil suits…

    But many investors viewed half a billion dollars as just a slap on the wrist for a bank that earned more than $13 billion last year!!! Ouchh!!

  3. Comment by IS — July 18, 2010 @ 7:46 am

    @TFB – Would love to buy all 3 and would think that at least 2 of the 3 would do well. But with the recent decline, Google has to be my top pick, no doubt!

    @John – Well, I think GS has also suffered a lot from its damaged reputation so I would not say it has been a “small penalty”. But definitely a good thing that it is over now.

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