This unique investment is in my portfolio for the long term
No one loves the hunt for the next big story hoard more than I do. But let’s face it, too many of these companies never live up to the hype. The obvious market names usually end up being the workhorses of most portfolios.
With that as a backdrop (and as the market dips into the red), here’s a look at one of the few names I intend to keep forever. You might want to consider adding it to your collection of long-term holdings as well. This is especially the case given that this stock has not only trailed the market lower since November’s high, but led a bearish charge with its 26% rout.
This inventory is Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG).
Older companies that have their best years of growth behind them are not everyone’s cup of tea. I understand. The search engine/advertising market may be at or near its maximum potential, as evidenced by years of inconsistent “per click” rates. Add the fact that Amazon now poses a threat to Alphabet’s advertising business and the bullish scenario weakens further. Meanwhile, Alphabet’s YouTube is also losing share to a myriad of new free content. Diffusion platforms.
Except that Alphabet is a cash cow regardless of the maturity of the Internet advertising market. Led by its advertising business, in just two quarters since 2010, the company has experienced a year-over-year decline in revenue, and one of those periods was the second quarter of 2020, when the coronavirus pandemic COVID-19 has started to spread in North America. What’s more, it ended that sales lull just a quarter later.
It’s not hard to see why Alphabet is such a reliable producer when it seems like it shouldn’t be: the world is incredibly dependent on the internet, and increasingly so.
A report by data analytics firm DataReportal says there are now 4.95 billion regular internet users on the planet, up from 4.66 billion in 2021. That means there are still around 3 billion additional people who could potentially access and then use the web. And like most existing Internet users, newcomers are likely to choose Google as their preferred search engine. Global Stats’ StatCounter says Google accounts for 92% of the search market and Internet Live Stats says they generate over 8.5 billion web queries every day.
It’s more than a business. Google is a cultural element that also happens to be a toll booth.
Some would argue that the shift from the world of desktop computers to mobile devices like smartphones is working against Alphabet, and in some ways it’s true. However, Global Stats estimates that Alphabet’s Android is the operating system installed on more than 70% of mobile devices worldwide, which still gives the company significant control over how these users use their devices. . Notably, Alphabet easily directs the 3 billion people using Android to the company’s App Store, Google Play, and for most Android-licensed smartphone makers, Google and Google’s Chrome browser respectively are the search engine. and default browser options.
These little things add up to make business more than a way to log in and then browse the entire web.
Even Alphabet’s YouTube is more than just a platform. The video repository has over 2 billion monthly users, who collectively consume over 1 billion hours of digital video every day. Indeed, for 35% of American YouTube users, Allan Thygesen, president of Google for the Americas and Global Partners, recently explained that it is the only video platform on which they connect. It’s a pretty powerful reach even though more free videos on demand options like Peacock or Pluto TV are starting to squeeze YouTube’s share of the ad-supported video market.
Digital platforms avoid most inflation risks
Alphabet isn’t the only company of its kind, mind you. I would say Amazon’s super simple shopping service is another revenue-generating lifestyle platform that consumers wholeheartedly support. walmart is also ingrained in the psyche of shoppers, and if you think about it, you’ll be sure to find more.
For me, however, Alphabet is the benchmark stock for a particular reason. While Walmart and Amazon both struggle with high costs and will certainly face this headwind again in the future, Google, YouTube and Android are digital platforms that cost relatively little to share with the public. Advertisers and licensees end up footing the bill. Alphabet’s rates are simply set somewhere above the company’s costs. That’s not always great pricing power, but until the world is ready to let go of its addiction to the internet and all it has to offer, it’s always sufficient pricing power.
10 stocks we prefer to Alphabet (A stocks)
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. James Brumley holds positions in Alphabet (A shares). The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares) and Amazon. The Motley Fool has a disclosure policy.