What's it like to eat crow on Wikipedia?
A fellow Fool let me know that one of my articles from 2005 -- in which I pitted a share of Google (Nasdaq: GOOG) against an ounce of gold -- is being referenced in Wikipedia's entry for gold as an investment.
I didn't rush out to tell my proud parents because:
- It's Wikipedia, freely editable by the next inspired visitor.
- It's not very flattering since I picked Google over gold.
Yes, I blew it. Google and gold were both barreling toward the iconic $500 mark at the time. Google was at $403.54. An ounce of gold was trading hands at $496. I sided with the search engine over the bullion, even with the generous head start for Mr. Gold.
Silly me. Did you know that crow tastes a lot like chicken?
A decade of decadence
As everyone knows by now, gold has gone on to double since the article came out. Google has inched just 9% higher. And, to be fair, more than half of that gain happened yesterday.
Technically, I should spit out the crow and try again in a few years.
"Would you rather own a share of Google or an ounce of gold?" I asked at the time. "Here's the stipulation: You have to put your choice under a mattress for the next 10 years. That's right. I'm taking something as volatile as Google and as cyclical as a gold coin and forcing you into a long-term commitment."
In other words, the finish line is still seven and a half years away.
Perhaps not all that surprisingly, I'm not going to jump ships either. I'm sticking with my original thesis that a share of Google will be worth more than an ounce of gold come Nov. 30, 2015. Am I just being stubborn? I don't think so.
I have nothing against gold. One of my most recent Motley Fool CAPS calls was to go bullish on ASA Limited (NYSE: ASA), a closed-end fund specializing in gold mining stocks. I can buy into the bullish arguments. The weakening dollar, the fast-growing emerging markets, and inflationary pressures will all make gold an attractive hedge. I just see Google as superior, even if it's the distant silver medalist at the moment.
The case for Google
Google is a smart company, growing earnings every year; 2007 was no different, with revenue and earnings soaring 56% and 37%, respectively. Other dot-com stars like Yahoo! (Nasdaq: YHOO), Microsoft's (Nasdaq: MSFT) MSN, and Time Warner's (NYSE: TWX) AOL aren't growing nearly as quickly. Only Baidu.com (Nasdaq: BIDU) is taking bigger strides, but it's also doing so off a much smaller base given its concentration in China.
The annual growth is important. Wall Street expects Google to earn $19.98 a share this year and $24.91 a share come 2009. That finds the stock priced attractively at 22 times this year's earnings and less than 18 times next year's profitability.
Will Google run into hiccups between now and 2015? Of course. However, its future earnings power is in its hands. It can dictate its future, give or take the volatile valuation expectations. Gold isn't in the same kind of driver's seat. What if the dollar reverses course and begins to head higher? What if investors return to different investment classes like stocks, bonds, and even real estate? Yes, real estate. The year 2015 is far enough away to give a battered asset class ample time for a turnaround.
I'm not out to dismiss gold. I can't predict what jewelry trends or country reserves will look like in the future. However, I can tell you that the prognosis is pretty good for Google to keep growing consistently as a high-margin advertising enabler.
I like things that I can somewhat control. That would normally dovetail nicely into Wikipedia, but why even go there and correct the entry (since Google and gold were most definitely not trading in the $700 range when the article was written)?
I've made my decision. I'm sticking to it.
Can you believe it? Google is playing the tortoise in this tale.
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