I have decided to part ways with
. Google remains a fine company, employing some of the best engineers in the Internet/technology world. I use the company's Chrome browser, and Google is my primary search service. Google is rich in cash and has zero debt. Furthermore, the company has made many investments that should pay off in the future.
Unfortunately, I have become weary of the management team's ability to lead this company into the future. Specifically, there are three recent events which when taken together have led me to my decision.
1. In January of this year, Google announced that it would stop censoring search results in China after the company detected attacks on emails of Chinese human rights activists. On March 22, Google redirected its China traffic through Hong Kong. That cuts out about 30% of the planet from using Google. In the process,
, the Chinese Internet search service, was left as the primary search service in that country. While Google's actions might have been morally correct, they were not optimal for shareholders.
2. In May, German prosecutors opened a criminal investigation into Google. The German authorities were concerned about Google's method of collection of private data from unsecured wireless home networks in Germany. Google was required to but did not agree to hand over disk drives with the incriminating data to local authorities. The investigation is still pending.
3. While Google received Federal Trade Commission approval to acquire AdMob, apparently there was some internal opposition at the regulatory body to the deal. I fear that the FTC and regulators in Europe could plan to sue Google on antitrust or anti-competitive issues. Google commands an overwhelming share of Internet advertising and search revenue in the U.S. and Europe. Europe is in desperate financial condition and could seek a source for fines or attempt to support European competitors. Google could be the easy low-hanging target. In the U.S., an antitrust lawsuit spells trouble.
These issues are all emblematic of a company that lacks the proper management team. Larry Page, Sergey Brin and Eric Schmidt are all brilliant engineers and technologists, but they lack corporate managerial acumen. As the company increases its global footprint, that triumvirate is increasingly putting the company at legal risk for which it has no experience to navigate.
As a result, I have sold my long-held shares of Google personally, for my family and for all my clients at
. I have some nice profits to protect, and I believe that the future for Google is far less certain than it was a few years ago.
Would I consider repurchasing Google at a later date? I sure would. However, investors fear uncertainty, and Google currently has a pot full of uncertainty. I am also fearful for other potential problems that have yet to surface for the Internet giant.
The remaining stocks in the
: The tech company is at or near all-time highs
: The quick-service restaurant company is at or near all-time highs
Aberdeen Israel Fund
: If you prefer, you can substitute
for ISL. Recent news concerning the Israel blockade of Gaza is sending shares of Israeli stock lower and should provide an opportunity to buy.
: A recent disappointment because of the
problem in the Gulf of Mexico. The entire oil services sector is weak. However, Schlumberger is not at fault in the Gulf and will benefit rather than get hurt by the incident in the long run.
: GS is embroiled in legal battles with the
. I am confident that GS will be victorious and that shares will recover lost ground.
In the meantime, I am searching for a replacement for Google for the Bar Mitzvah Portfolio. After all, my son is soon to become Bar Mitzvah himself, and I want to have the right portfolio for him.
-- Written by Scott Rothbort in Millburn, N.J.
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At the time of publication, Rothbort was long AAPL, MCD, ISL, EIS, SLB and GS, although positions can change at any time.
Scott Rothbort has over 25 years of experience in the financial services industry. He is the Founder and President of
, a registered investment advisor specializing in customized separate account management for high net worth individuals. In addition, he is the founder of
, an educational social networking site; and, publisher of
. Rothbort is also a Term Professor of Finance at Seton Hall University's Stillman School of Business, where he teaches courses in finance and economics. He is the Chief Market Strategist for The Stillman School of Business and the co-supervisor of the Center for Securities Trading and Analysis.
Mr. Rothbort is a regular contributor to
TheStreet.com's RealMoney Silver
website and has frequently appeared as a professional guest on
Fox Business Network
and local television. As an expert in the field of derivatives and exchange-traded funds (ETFs), he frequently speaks at industry conferences. He is an ETF advisory board member for the Information Management Network, a global organizer of institutional finance and investment conferences. In addition, he is widely quoted in interviews in the printed press and on the internet.
Mr. Rothbort founded LakeView Asset Management in 2002. Prior to that, since 1991, he worked at Merrill Lynch, where he held a wide variety of senior-level management positions, including Business Director for the Global Equity Derivative Department, Global Director for Equity Swaps Trading and Risk Management, and Director for secured funding and collateral management for the Global Capital Markets Group and Corporate Treasury. Prior to working at Merrill Lynch, within the financial services industry, he worked for County Nat West Securities and Morgan Stanley, where he had international assignments in Tokyo, Hong Kong and London. He began his career working at Price Waterhouse from 1982 to 1984.
Mr. Rothbort received an M.B.A., majoring in Finance and International Business from the Stern School of Business, New York University, in 1992, and a B.Sc. in Economics, majoring in Accounting, from the Wharton School of Business, University of Pennsylvania, in 1982. He is also a graduate of the prestigious Stuyvesant High School in New York City. Mr. Rothbort is married to Layni Horowitz Rothbort, a real estate attorney, and together they have five children.