It’s become almost a daily headline that the Dow hit another all-time high. It’s already happened again today before stocks slipped about an hour into trading. A lot of people are now watching the S&P 500, which has come within nine points of its all-time high of 1556.77. I expect it to get there because, when it’s that close, you know traders will make a run at reaching the summit. It’s like the response of George Mallory when asked why he wanted to climb Mt. Everest: “Because it’s there.” Traders will make a run at a new high “because they can.”

In a momentum-driven rally like the one we’re in, the winners are often the best-known mega caps, especially those with promising growth ahead of them. That’s why I want us to open up a position in Google (GOOG). I don’t expect us to hold it real long, but a pullback in the stock today gives us a chance to capitalize on momentum without taking on too much risk.

New Position: Google (GOOG)
Type: Mega-Cap Stock
Allocation: 8%
Strategy to Open: Buy up to $830

Google is obviously one of the best known companies on the planet, so we don’t need to spend a lot of time talking about what it does. It dominates web search, of course, but Google’s reach extends into many other areas, from mobile to maps to music and just about everything else in our always-connected world.

The stock has had significant momentum in the market, running from last November’s lows around $650 to an all-time high (sound familiar?) of $844 last Wednesday. There are a few factors at work here. We have the strong overall market, and for Google in particular, investors are beginning to realize that fears surrounding the shift to wireless searches were overblown.

Fourth-quarter earnings were solid, with revenues excluding Motorola Home up 22%, and earnings advanced 12% to $10.65 a share.

I also believe the market is starting to realize that some Google properties, especially the Android mobile operating system and YouTube, are strong growth drivers not yet fully priced into the stock. Android is used in 75% of the world’s smartphones, and YouTube has more than 800 million unique visitors per month. There are not a lot of other hard numbers to back up the growth, but you know Google will find a way to monetize both.

Despite the strong run in the stock, GOOG is not that expensive on a relative basis. It trades at less than 18X estimated earnings of $45.50 for the 2013 fiscal year, which would be over 14% growth from $39.82 in 2012. In addition, Google has roughly $130 a share of net cash on its balance sheet. Earnings growth is expected to accelerate in 2014 to $53.44 a share.

After hitting its high of $844 last Wednesday, GOOG has pulled back under $830 today. Buy GOOG up to $830 and make it an 8% allocation in your portfolio. I’ll be buying approximately 9-10 shares, worth about $8,000 at current prices. I look for it to make a move toward $850 as the S&P heads toward record highs. We’ll be quick to take profits when it gets there, and I’ll also be monitoring downside risk carefully. If GOOG starts heading down toward $800 and the broader market’s momentum shows signs of waning, we’ll close the position quickly.

I do expect volatility to increase in the near future. It’s to be expected at all-time highs anyway, but we’re also not far from April and May, which can often be bumpier, and evidence is mounting that the next earnings reporting season could be lackluster. Our large cash position will help protect us, though I do expect us to continue to build out the portfolio as opportunities present themselves. In addition, we have a hedge with the ProShares Short S&P 500 (SH), and I’m watching the volatility index (VIX) closely. When you look at its chart, you see it has to move higher soon, so I’m watching potential opportunities for us there as well.