At Thanksgiving my friend Dan asked what stocks I liked, if any.
I don’t know stocks or trading well and I have been very negative on the market for a number years. It’s been my belief that the market is no longer suited for small-time individual investors: buy-and-hold is dead, no company can be trusted long-term. The rate of innovation is increasing at such a torrent pace that publicly traded companies can’t maintain positions at the edge of innovation — by their very nature as public entities. I also believe the market is overly manipulated by big money in ways we can’t currently fathom. Complexity and network effects rule the day. Now that we’ve seen ‘too-big-to-fail’ and black-scholes proven as hogwash we really need to think long and hard about what constitutes risk.
Despite my negativity, here are two stocks I do like:
Amazon (AMZN)
I like Amazon because it’s simply the most convenient way to buy things. Period. The prices are great and the review system makes it my gateway for smart decision making. Amazon has weathered the economy before and will do it again; I don’t know anyone who has ordered from Amazon only once. I love the idea of the Kindle and believe it could be the next iPod – the text book market is huge. I also like the fact that Amazon is involved with information storage and the Cloud. Amazon Services are the engines powering many of tomorrow’s innovation leaders (S3, Ec2, etc). Plus now that the price of gas has dropped, hopefully Amazon is hedging and can kill its forecasted margins on shipping.
Google (GOOG)
Sure everyone is negative on online ads. The thing people don’t realize is that online ads are the primary way to reach people and Google is only on the tip of the iceberg. Plus Google’s model is scalable now that it has critical mass and few competitors in search: if Google needs more money, it advertises on the search page or makes the ads bigger or more interactive. Google owns great properties it has yet to monetize (at all) – YouTube, Gmail, GrandCentral and Google Reader come to mind. I would definitely pay money for Gmail or Google Reader; no questions asked. Mobile will be huge for Google — 75% of the time I spend on my iPhone is using a Google service. Also I see this down economy as a potential plus: there’s less incentive for employees to leave and start their own ventures. This means Google retains its talent longer (arguably the best of any company). As evidenced by Gmail Labs, Google already does a good job of incubating concepts internally. Finally, I think Google Translation could be a dark horse in leading the future of the web…
[Update: Good post at Gigaom called: Is It Time to Buy Google Shares?]
If you want to see what the experts think I suggest checking out Howard and Soren’s StockTwits