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Dos Hombres: A Google Miss and Defensive Plays

Fin - Breakout - US

Dos Hombres: Two guys, two takes, two minutes...GO!

Matt Nesto reviewed the week that was; the market suffered a sell-off that could never quite pick up steam. Energy, materials and particularly financials may have been soft, but the slack has been picked up by what Nesto calls the "SHUT-UP" market, as staples, health, utilities and telecom were up noticeably. A rotation may have been welcome to a market with painfully thin leadership.

Whatever the rationale for buying, the bears are going home Friday unsatisfied yet again as the trendlines remain higher for the broad tape.

Speaking of broken, I reviewed Google's (GOOG) miss and discussed why traders would take down a company continuing to grow earnings at a strong pace. Google owners need not take the move personally; it's simply the maturation process of a corporation and stock. Google's earnings are growing, but not as fast as its expenditures. While the company takes the stance that capital investment is a sign of confidence in the future (and it inarguably is), the Google of five years ago grew explosively -- seemingly without trying.

If past is prelude, it's going to be a while until Google's stock is a consistent winner. I used a 20-year chart of Wal-Mart (WMT), which has been flat for around 12 years, for illustration, but I could have picked from many of the stocks that grew into their slowing earnings by flatlining for a generation. McDonalds (MCD), IBM (IBM), Microsoft (MSFT), Coca-Cola (KO), etc. These are all great growth story investments that "paused" for a generation while the companies aged.

And if the Google bulls don't like the comparison, hey -- I could have used a chart of AOL.

Let us know what you think. Write to us at Breakoutcrew@yahoo.com.