In 1998, Andy Bechtolsheim made one of the greatest investments of all time... And he did it on a friend's porch.
Making Billions of Dollars on a Friend's Porch
By Marc Chaikin, founder, Chaikin Analytics
In 1998, Andy Bechtolsheim made one of the greatest investments of all time... And he did it on a friend's porch. The friend had asked Bechtolsheim to stop by on his way to work. He wanted the wealthy entrepreneur to talk to two Stanford University grad students. The students were working on an interesting project. And they were thinking about turning it into a business. Bechtolsheim agreed to a quick meeting. He was always happy to help young tech entrepreneurs. And he had plenty of firsthand experience to share... Bechtolsheim had made a fortune in the 1980s. He dropped out of Stanford to co-found Sun Microsystems. And the company went on to dominate the workstation computer market in the 1980s and 1990s. Bechtolsheim pulled up to his friend's house at 8 a.m. sharp for the meeting... There, he met a pair of 25-year-olds named Larry Page and Sergey Brin. They had created an Internet search engine that was a lot better than the market's current options. Bechtolsheim sat on the porch while the pair ran a demo on a laptop. The meeting didn't last long. Here's how Brin described it... [Bechtolsheim] took a quick look at our search engine. We chatted with him a little bit. He said, "Well I don't want you guys to have to take too low of a valuation or to have to worry about these money things right now... Why don't I just write you a check?" So he went back to his car. He came back with his checkbook and wrote us a check for $100,000. With that, Page and Brin had enough money to get Google off the ground. They celebrated by going to Burger King for breakfast. There was one problem, though...
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Bechtolsheim made the check out to "Google Inc." But the company didn't exist yet – at least, not officially. For the next month, the check sat in Page's dorm room while the pair filed the paperwork to set up a corporation. Bechtolsheim remembers the meeting a bit differently. In a 2015 interview, he said that Google was "one of the best ideas I'd ever seen." He used the Internet a lot. And he saw the problems with existing search engines like Yahoo, AltaVista, and Excite. As he said in that same 2015 interview, "I couldn't find stuff anymore on AltaVista, so I was desperate for a better search [engine]." The key difference came down to Google's algorithm... Instead of just looking for keywords on a page, it checked to see how many other sites linked to a particular page. Bechtolsheim liked this approach. It was like academic publishing. In that field, the most important papers get cited more often. And in turn, that proves their reliability as a source. The business plan made sense, too. Google would deliver ads based on a user's search. And then, it would charge companies a few cents whenever someone clicked on an ad. At the time, banner ads were the main form of online advertising. Bechtolsheim thought Google's "sponsored links" would work much better. He also didn't mind putting $100,000 into a company that didn't exist yet. As he said in the 2015 interview, "The concern I had is, if they didn't get going, this great idea [might not happen]." Today, the story of the first Google investor is part of Silicon Valley lore. And everyone knows how it turned out... Within a few short years, Google became the world's top search engine. As the Internet took off, the company made billions of dollars by collecting a few cents on every ad click. No one knows exactly how much money Bechtolsheim made. But according to reports, he got between 2.5 million and 5 million shares for his investment. That means he likely made billions of dollars on his original $100,000 stake. Today, Bloomberg estimates Bechtolsheim's total net worth at around $25 billion. That puts him at No. 77 on the publication's list of billionaires. And as we all know, Google is still going strong as well... The search engine was just the start for the tech giant. It now operates under the name Alphabet (GOOGL). Alphabet currently holds a "bullish" overall rating in the Power Gauge. In fact, over the past five years, the company has barely had a "bearish" month in our system. That's the power of a strong brand. And it all started on a porch in California. Good investing, Marc Chaikin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.28%
11
13
6
S&P 500
+0.67%
90
256
152
Nasdaq
+1.23%
31
49
20
Small Caps
+1.38%
425
1019
462
Bonds
+0.31%
Energy
+2.1%
3
13
6
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bearish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Communication
+2.07%
Utilities
+1.34%
Energy
+0.6%
Materials
+0.43%
Health Care
+0.35%
Discretionary
+0.09%
Staples
-0.18%
Real Estate
-0.24%
Financial
-0.35%
Industrials
-0.9%
Information Technology
-1.14%
* * * *
Industry Focus
Capital Markets Services
24
35
3
Over the past 6 months, the Capital Markets subsector (KCE) has outperformed the S&P 500 by +15.38%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #4 of 21 subsectors and has moved down 2 slots over the past week.
Top Stocks
GS
The Goldman Sachs Gr
IBKR
Interactive Brokers
BK
The Bank of New York
* * * *
Top Movers
Gainers
PLTR
+23.99%
SMCI
+8.6%
MPC
+6.74%
XYL
+5.24%
FOXA
+5.18%
Losers
EL
-16.07%
PYPL
-13.17%
MRK
-9.07%
KKR
-8.53%
CLX
-7.24%
* * * *
Earnings Report
Earnings Surprises
MPC Marathon Petroleum Corporation
Q4
$0.77
Beat by $0.75
EL The Estée Lauder Companies Inc.
Q2
$0.62
Beat by $0.30
IT Gartner, Inc.
Q4
$5.45
Beat by $2.19
CNC Centene Corporation
Q4
$0.80
Beat by $0.31
ESS Essex Property Trust, Inc.
Q4
$0.65
Missed by $-0.71
* * * *
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