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Google beat expectations and the stock went down

Updated on April 18, 2010

Be your own analyst

So GOOG has another good earnings by beating the consensus of analysts analyzing this stock.

Now why did ole Googy go down?

The short answer is that the analysts are not the buyers and sellers of a stock. There are several ways to figure out whether a stock is a good investment or not. A person can use charts if they want to trade. If someone wants to invest, they should try to figure out if the stock has potential to rise or to fall. Most investors are going to be a long holders of the stock so we are going to concentrate on a stocks potential of rising.

So what does an analyst do?

An analyst tries to figure out things like how much a stock will earn and give a stock a rating which will tell people if a stock is a good to buy or not. The analyst will give a price target. The analyst does this by looking at metrics of a stock as well as things like potential items that will cause a stock to rise like a new product. They may also look at things that might cause it to fall like rising expenses. (That was a recent complaint regarding GOOG's earnings)

So you dont have to do anything right? After all, the analyst has it all wrapped up in a nice little package and you dont have to think.

The problem is that the analyst are often wrong. They are all human right? . I am going to do some hubs on analyzing stocks and I will pick on GOOG. We may listen to analysts and maybe Jim Cramer but we will do our own "due diligince" also know as DD.

I will talk about price to earnings and learn about EPS and how to read a 10Q and how to put it all together to give rationalizations. While the stock market does not completely move on fundamentals (big money moves it), it will give us a good investment rationalizations which will over time mean we will have good investments.

Many people dont believe that GOOG has much growth left. Others say it still has much growth left that this price action is just an anomoly. There are those who say Google is going to fail because of what has happened in China.........and I can go on.

However, you have to be the judge. You can let the analyst's guide you but you have to make your own decisions based on your own analysis to be an profitable investor. You cant let others make these decisions for you. This is a good first step in learning to invest.

Disclosure: I am neither long or short GOOG and this post is for entertainment purposes only. Your investments/trades are your sole responsibility.


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