Tuesday, November 30, 2004
bambi francisco - faulty logic
It pains me to see some highly paid, promoted, column writing analyst, cannot even get some basic comparisions of stock right. In the world of money, there are a lot of folks like this. That is the reason why Motley Fool and TheStreet.com sites stand out. I may disagree with their judgement, outlook on the market/stock, but their analysis is always based on solid numbers and proper evaluation.
I came across this article by bambi francisco titled 'getting google religion'. Her first point is about how there are still a few non-believers among analysts. Ofcourse, she sees these non-believers as "buyers to be had". I don't agree with this sentiment that the "bears" push the stock up. I think it is more likely that the bears help creating a floor. In anycase, i'll let this point go.
Then bambi jumps off into her talk about "float" and how it is all about supply and demand. Yes it is indeed about supply and demand. But bambi, get your math right.
First of all, just because it's "float" it may not be available for sale. Here's one definition of float.
So, it all shares that are not restricted. Just because the shares are not restricted, doesn't mean it's available for sale. Briefing.com (another good site) has this article (very good) about google's float. So the real float - the shares really "floating" in the market are less than the float calculated in the briefing.com's page ( ~127M shares).
Bambi then proceeds to compare the floats of amazon, google, ebay and yahoo and decides that google's float is way smaller. She is dumb enough to compare absolute share numbers!!! According her back-of-the-envelope calculation, goog will soon have 175M share float which is less than amazon's float of 283M shares. umm yeah. But as a percentage, goog's float will be 64% and amazon's current float is 69%. What's the big difference? Comparatively, ebay's float is at 77% and yahoo!'s float is at 87%. I am appalled that a syndicated columnist like bambi francisco can make mistakes like this. Comparing absolute share numbers doesn't mean much because each company has totally different number of shares outstanding and per share price reflects that.
Google is a new company and it's float is going to be smaller (especially the real float), but it's not 1/6th of yahoo!'s float or 1/3rd of ebay's float. Ofcourse, she makes sure to tell us that MSFT has 9.3B share float. MSFT float is same as that of yahoo! at 87%. By her logic, companies that do stock splits should suffer, because the supply is going to increase!!!
OK. I think i beat that point to pulp. Bambi, learn about outstanding shares, stock splits, percentages.
Next thing bambi says, is that institutions because institutions see ebay/yahoo/google as the three core holding, they will hold exactly the same % of outstanding shares in all the three companies. HUH! where did she come up with that? For the record, institutions hold 67% of ebay stock, 75% of yahoo! stock, 55% of msft stock and 61% of amzn stock. If all the institutions got together and decided to pick one of the 4 numbers which would they pick? obviously, the highest - right? ofcourse, they are also not going to do any valuation, or business outlook etc, just decide that they have to acquire the stock soon. They'd say "It took us institutions 3 months to get 11% stake in google, we better hurry and buy more google at what ever price it becomes available." Bambi, it took institutions several years to get to 75% of yahoo! stock or 67% of ebay stock. They entered at various price points and probably did some analysis.
Sad thing is that bambi started out with good points fundamentally. I agree with all those. Just happens that she has really bad analysis behind her points. In my past post about reasons to buy google, i did say that institutions will have to pick up more google, especially index funds.
It just outrages me to see people with limited understanding of fundamentals getting paid to write syndicated columns. Investor's business daily and CBS marketwatch, must have a hard time finding decent financial analysts.
Comments:
check out her legs in this interview, she's got a hot bod!
http://www.marketwatch.com/tvradio/playerfull.asp?siteid=yhoo&dist=yhooBB&guid=%7BE01FF343%2D8B90%2D40D0%2DB13C%2D8E3CEC2929C2%7D
http://www.marketwatch.com/tvradio/playerfull.asp?siteid=yhoo&dist=yhooBB&guid=%7BE01FF343%2D8B90%2D40D0%2DB13C%2D8E3CEC2929C2%7D
I totally agree with you on Bambi Francisco's analysis. She starts out with good numbers (assuming correct numbers), but then she proceeds to analyze and use these numbers, that's where she fails miserably, and you just wonder what's going on in her brain. If she's ever taken a finance/math/economics class ever. It's quite frustrating how much bad info is out there. Incidentally, I agree with all your points on GOOG.
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