Patience

written 6/17

I've had my eye on a couple names I'm waiting for moves on. First is MCD. I've seen it mentioned over the last few months as a defensive name. Me, I like their growth prospects. Even though sociology students have decried McDonaldization for a generation, their emerging market footprint is far below Japan/US/France. I also originally looked into them because I expect the wage/exchange rate gap to narrow somewhat over the next ten years (though China's could easily expand short term). Anyway I'm waiting because of McDonald's huge exposure to the euro via France. I had no idea! I suspect but am not confident that the euro will take a major hit at that point. McD looks like uncompensated risk for that possibility. Perhaps more importantly, the popularity of defensive names will eventually pass, providing selling pressure...

The other is Google. I wrestled with considering this one for a while – I really, really don't like their corporate governance, and I'm not confident in their leadership and direction. Their acquisitions and focus on social is particularly aggrevious. Even the way they do that – the letter from the top informing everyone 25% of their bonus is dependent on success in social? Sounds like a fine way to run a manufacturing concern...

But the positives for the stock are immense. Revenue is almost all real time auction based – so they are very well protected from inflation/debasement. I expect their gravy to grow a little faster than the economy/business averages over the long term as the generations that came up on internet take over a greater share of purchasing power. Short term I think there is very good potential for growth in Local. Google maps are superb and android is solid.

But I don't like dual class shares. I wouldn't like to invest in Berkshire Hathaway for the same reason. But at least Buffet seems to put shareholders first...

Postscript (7/18) - I decided to set limits for myself on companies with weak shareholder protection; 10% in a name, 20% portfolio wide (gross? not netting out short positions). I set up a small position long GOOG short RAX. Got lucky on Google; I thought the reaction to increased expenses last quarter was way overblown but the rebound was much higher than I expected!

MCD I'm expecting to wait at least 6 months, likely well over a year.