Google Loves the Little Guy; But Not Their Votes

Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Before everyone gets happier than Ndamukong Suh stomping on a defenseless lineman, following everyone into “rally” mode, let’s take a collective breath and reflect. To start earnings, Alcoa (NYSE: AA), reported a “surprise” profit, leading some to claim the “…report really helped key the rally.” (Andrew Fitzpatrick, Director of Investments, Hinsdale Associates, Inc.). Really? I apologize for disagreeing with the sentiment, but Alcoa’s relevance with earnings is about like a city Mayor’s involvement with new business simply by cutting the tape with those obnoxious, oversized scissors on opening day. They report first each quarter, that’s it. I’m sorry, but Alcoa has moved the dial for me exactly zero times in better than 10 years, now. That’s 40-plus earnings calls that get about as much attention from me as the next Adam Sandler bomb. The surprise profit “…speaks to what is happening elsewhere,” according to Frances Hudson, strategist at Standard Life Investments. Thankfully she threw some cold water on all the sunshine and free love that’s surely to result from such a “rally” by correctly stating the market is not moving with volume or conviction, so that was a refreshing bit of reality, even though a fair amount of us would actually welcome a rally. But these are the sensationalistic times we live in now, which can be more annoying than elusive loose change rattling around the metal drum in your dryer. Your clothes will never get dry the number of times you keep opening the door, blindly looking for that never-to-be-found nickel. Justify your own activity with your own homework, not because someone says it is the way it appears to be to them.

After five down days (“the worst week of 2012, buckle up, let’s all get into cash”), of market “correction”, “adjustment”, or whatever label any screaming head from the media outlet of choice decided to pin on the market, we should recognize these moments as opportunities. Case in point, remember fairly recently when China was said to be slowing down growth? Okay, so now we have several people declaring that the GDP number to be reported from the great market-moving Orient Express should actually be better because there is a school of thought that the most populated nation is “sandbagging”. I am not making this up.

China’s estimates are set for 2012 GDP growth of 7.5%, but our friends looking out for us little guys, the analysts, estimate as much as 8.3% growth for the year. Now here comes the fun part. I hope they are both wrong. I realize the swelling masses that follow me are inclined to start murmuring like members of British Parliament, but let me state that I am primarily a long investor, and as such, I rather enjoy those down days when I get to scoop up irrationally sold, discounted companies. Retractions are completely healthy, nothing goes up forever, and if you have been keeping up with my mentions, well, we haven’t done so bad this year, have we?

So while all the financial pundits cannibalize each other for ratings, take everything with one or two grains of salt (if your body can handle the minimal intake of sodium), and let them debate over the impending “end of the world” China hard-landing (GDP below 7%), or soft-landing (somewhere between the estimates).

What we need to focus on after the GDP numbers are out, and we either see panic (please buy into this), or joyous crying over double rainbows and market unicorns slay all the bears and the DOW soars above 13-thousand as if it were a rock flying through a piece of paper (please take some profits). Wait, paper covers rock. Anyway, since we have the homework aspect with our holdings covered, we need to get back to the bountiful buffet of company earnings ready to roll out before our eyes and ears.

Google (NASDAQ: GOOG), announced an earnings-per-share beat ($8.75 versus $8.23 estimates), as well as a two-for-one stock split, in the hopes of making the stock “affordable” for the “little guy”. I don’t know very many “little guys” with $300-and-change sitting around in a brokerage money market waiting to pounce on a stock after it has split, but the idea sounds nice. The part that doesn’t sound nice is the “new” shares won’t come with any voting power. Welcome all the retail investors into the company without any say, that kind of stinks. So now all the little guys, although they are registered to vote, have no right to do so, effectively giving company management the wherewithal “to ensure that our corporate structure can sustain these efforts and our desire to improve the world,” (from a company letter released to shareholders). Seriously?

Now a company like Google, which has 20-times the market cap of Alcoa, does move the dial for me, and even though I am not an investor with them, I pay attention to what’s going on with Larry (CEO, Larry Page), and the gang in the lush Mountain View, California hamlet. Google’s call also cited positive momentum from their Android products and YouTube, and stated they remain focused on the tablet market. As an Apple shareholder, I enjoy hearing that, since I think competition is healthy and it keeps everyone performing at a high level. And I think they both just want to increase shareholder value, while at the same time “improve the world”.

So for all of us little guys with wads of $300 dollar bills rolled up, itching for some investing action, make sure you are aware that the “classless” Google stock doesn’t come with a vote. Not that it matters anyway, the three-headed monster (Page, Chairman Eric Schmidt and co-founder Sergey Brin), has 66% of the company’s voting power (pre-split, by the way). I am pleased with Google’s results, I think it’s a much better market indicator than Alcoa’s, but that’s just me, a little guy.


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