Regardless of Microsoft Corp.’s (Nasdaq: MSFT, stock) strategy to tame internet giant Yahoo Inc. (Nasdaq: YHOO, stock) into submission, there’s no money to be made from both stocks. Such acquisition news depends solely on your luck – if you somehow bought into Yahoo’s shares before the announcement, you made money else don’t bother. Regular FinanceTwitter readers should know I never touch both stocks, for obvious reason. But that doesn’t stop me (and you) to make money leveraging on such acquisition news.
If you’re first time reader of FinanceTwitter I hope you’ve read into such news as opportunity to make money by shorting Google stock or its Put Options. Back then FinanceTwitter wrote reasons why Yahoo should accept Microsoft’s $44.6B offer and for this simple reason why you should short the stock. Everybody knows the market pulse is not bullish. If it’s not bullish then it’s bearish – no brainer huh? Seriously who would dare to long the stocks at such moment when U.S. economy wouldn’t be any much better till the end of 2008, well, that’s what analysts said and the perception on the trading floor just aren’t any better.
Since Google Inc.’s (Nasdaq: GOOG, stock) disappointed result which saw its stock plunged from the height of almost $750 a share, all the stars were almost aligned for you to be bearish and short the stock or buy the Put Options. FinanceTwitter opened the position, GOOG MAR 2008 500 Put Option on 1st Feb 2008, the same day the article was published and has been hanging on ever since. The stock dropped the next day (and made money instantly) but I chose to hold and the sight of your position going the other way thereafter wasn’t a pleasant one. If you’ve been monitoring Google Inc. you knew this monster can’t crawl very far.
Today I closed the position netting 103 percent profit when the stock price of Google Inc. crumbled nearing its 1-year low. The reason – technology-sector researcher comScore released several reports that pointed showed a continued decline in the number of web surfers clicking on Google’s paid-clicks ads. The number of clicks fell 7 percent in January from previous month and the click-through rate reported was the lowest since comScore started such data report. Google Inc. had recently reviewed or changed the area of ads to be clickable to reduce the number of accidental clicks by users but it somehow backfire, as can be seen by comScore latest report.
While the action taken by Google Inc. is laudable it’s actually quite early to condemn Google’s stock at this moment. Analysts and advertisers noted that Google is taking steps to improve the quality of its links and click-through rates and such weak reading is only temporarily. Weaker paid clicks will be partially offset by stronger pricing as Google raises conversion rates, argued one analyst. Also I’ve read some publishers who initially reported lower clicks on their Google Adsense account have actually recorded higher rates per click thereafter although it might not be true to all the publishers.
Anyhow, it’s not wise to take any chances and such weakness (Google Inc.’s stock) should be seen as the best time to take money off the table and run. Furthermore I still have some position on GOOG APR 530 Put Options that I entered together with Baidu.com, Inc. (Nasdaq: BIDU, stock) of which I’ve closed earlier on.
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