𝐖𝐡𝐲 𝐆𝐨𝐨𝐠𝐥𝐞..
Dear investors,
The advantage of investing in tech companies is the growth, the disadvantage of investing in them is the growth.
If we look at the portfolio, we can see that the allocation to one company is quite large, this is $GOOG (Alphabet) . Why is that?
First of all, I was a fan of the company for a long time, but it was never at a low enough level to be bought from a valuation point of view. At the moment the growth rate has decreased a little and obviously, the market is overreacting (as usual). It may seem that I look at things superficially, but I like to simplify as much as I can.
𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥𝐬:
Google is one of the best businesses out there for the past 10 years:
- Revenues: 282 billion USD
- Net income: 60 billion USD
- Free cashflow: 60 billion USD
- Net income margin 21,2%
- Return on invested capital: 20,66%
- Market capitalization: 1,14Trillion USD
- Debt: 30 billion USD
Google lost almost 40% of its market capitalization in a single year while generated 60 billion USD in profits - Is the market rational?? I do not think so.
Google`s biggest revenue stream is the advertising business which has been decreased and this scared the investors. This shows us that the market wants its money easy and quick and its thinking is always linear, but a business most of the time is not linear.
If we zoom out we can see that Google`s earning power was not hit by the current economic situation. Even with high interest rates, macroeconomic pressures the business is doing well and this is what makes a company great.
Every (great) company has ups and downs, just check $AAPL (Apple) in 2018. The last time we can bought Google at PE under 20 was in 2014, almost 10 years ago. Who knows when will we have this opportunity again. That does not mean that the stock can go only up from here, but I am happy at this price.
It is not easy to compare Google with its competitors because there are only a few and they are not really competitors. So I think the best thing to do is to compare the current valuations with the past and in this way Google looks cheap.
My current investment in Google is over 12% and at this current price I am thinking of adding more in time.
What are your thoughts about Google?... Show More
