A few words from Google executives last week have some investors wondering if the Mountain View, California-based Internet giant might start buying back some of its own stock.
"This is a bit like Kremlinology," Matt Gohd of Revere Capital said as he explained his theory.
Last week Google Executive Chairman Eric Schmidt hosted a shareholder meeting at the company's headquarters, giving Google investors a rare chance to put questions to the shareholders. Executives were asked about whether the company was planning a stock split. The executives did not directly answer the question.
So why would dodging a question about a stock split lead to a theory that Google might start buying back its shares? Because the Google executives also admitted the board had discussed a stock split.
"It shows that they're thinking about their stock. They're not oblivious to it. And when a company starts thinking about its stock price, it usually means it is going to do something," Gohd said.
Gohd figures that with the stock down more than 12 percent this year, it is probably attractive to executives.
"They're doing phenomenal. But they're not getting any credit for it," he said.
Gohd thinks a split, combined with a buyback, could push the stock to prices that would more than make up for the drop in the first six months of the year.
Gohd is long on Google, which means he would profit from such a move or even from investors buying the stock in anticipation of that move.
But he's not alone on this thesis. Two small hedge fund managers I spoke with Tuesday (each of whom asked that I not identify them) said they agreed.
"It's the natural evolution of a company. At some point, you start watching your stock price. Especially when it goes nowhere month after month, you start figuring out how to light a fire under the engine," one said.
I pointed out that lighting fires under engines is probably not a good idea.
"Whatever. I'm just saying: Google's watching its stock. That's good news for investors," he said.
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