STEVE INSKEEP, host:
On Fridays, the business report focuses on your money. This week, shares in Google flirted with the $300 mark, which makes Google the most valuable media company in the world--at least on paper. Now investors who bought when the company first went public last summer have tripled their money, which does raise the question for some of when they should sell. James Stewart has been asking himself that question. He's a columnist for SmartMoney Magazine and an author of a number of books. He bought Google at $85 a share last summer, and even though he thinks it is overvalued, he says he cannot quite bring himself to part with it yet. And Mr. Stewart joins us now.
Good morning.
Mr. JAMES STEWART (SmartMoney Magazine): Good morning.
INSKEEP: Why not? Why not sell?
Mr. STEWART: Well, actually, I did sell a little bit, and actually...
INSKEEP: Too tempting.
Mr. STEWART: ...I sold enough to cover the cost of my original investment. I think--at least for me, and I think it's true for many investors, it's so hard to part with something that has given you so much positive reinforcement over the last year. A year ago in the summer when this thing went public, nobody wanted to touch it. Wall Street ganged up against Google. Professional investors were saying, `Oh, this is overpriced.' And now, suddenly, it's getting up towards 300 and some of these same people are saying, `Oh, it's worth 350, it's going even higher.' I write a column so everybody knew I owned it. I mean, everywhere I went, people said, `Oh, you're the guy that bought Google. You're a genius. You're so smart,' you know? So you get all this reinforcement. Who wants to give up something like that?
INSKEEP: This is, I understand it--this $300 share price means that the price of the stock is a hundred times more than the stock earns each year, which is not such a good price-to-earnings ratio.
Mr. STEWART: Yeah.
INSKEEP: Do people even pay attention to those things anymore?
Mr. STEWART: It's over a hundred times. Well, I've heard from, you know, plenty of Google enthusiasts who say, `Oh, the P/E doesn't matter.' And I'm thinking, `God, this sounds like a broken record from five years ago at the top of the technology bubble.' The other thing that really struck me is that the Google founders--and I'm big fans of theirs, but they said they don't really care about quarterly reports, and they're going to run the company and invest for the long term, not meeting short-term Wall Street expectations every quarter. Well, so far they've beaten those expectations, but the day they don't, that stock is going to tank.
INSKEEP: A lot of people at one point or another in their lives get into a good investment, whether it's a stock or real estate. How do you keep yourself from getting too greedy in that situation?
Mr. STEWART: Well, I think the psychology of this is very important. And I don't know if greed is the right word; I don't like to think of myself, certainly, as a greedy person, yet I have to say it's bolstering to the ego when you make a decision and it turns out to make a lot of money. I hear this all the time now, people who have bought real estate, and they're all feeling like kings at the moment. I think one of the hardest things to do in investing is to take a cold, hard look at the things that do really well and say, `Aren't these getting a little bit ahead of themselves? And should I maybe, you know, cash in some gains?'
INSKEEP: Jim Stewart is the editor at large for SmartMoney Magazine, and if you were to Google his name you might find out he's the author of the book "Disney Wars." Thanks very much.
Mr. STEWART: Thank you. Transcript provided by NPR, Copyright NPR.
