Alphabet Inc (GOOG)

(Top Pick Dec 15/15, Up 7.11%) It has been a steady performer. He does not think it satisfied a lot of investors because their price action does not reflect their results. They are revolutionizing the online experience. 84% of their business is over mobile devices. Management has introduced a lot of discipline into the company. YouTube has taken off. They are making money. It is a bit shy in terms of multiple.

Presently about 35% of advertising budgets are allocated for online, and that is going to increase over time. This is the largest search engine out there, so they are going to garner a certain percentage of any advertising budget. There has been a pullback in the large cap tech stocks, but that has been recovering. The valuation on this is a very reasonable. (Analysts’ price target is $968.94.)

This has had a nice pull back. The balance sheet is growing all the time.

This sold off after the election. In terms of growth rate and valuations, the revenues next year are expected to grow 16%, EPS growth of 19%, and you only have to pay 19X earnings to get that. Consumer staple stocks are trading at 20, 21, 22 times earnings, and the revenue growth is only 2%. (Analysts’ price target is $967.70.)

The FANG stocks have not participated since the Trump rally took off. You are seeing pressure against a declining 20 day moving average. They are not participating in the infrastructure build, industrial revolution, financial rallies. You want to be in other places at this point. We do have a 200-day moving average coming into play at about $760. If it can hold that, it might be something to shoot against, but until we can break the trend of lower highs and lower lows, this could be heading lower. (See Top Picks.)

He tries to gravitate towards companies that have very good defensible businesses with dominant positions. This is definitely one of those, if you think of how much of the mobile ad market they dominate. Also, their participation in the oligopoly of the Cloud. Very rarely can you get exposure to a company like this, at a multiple that is close to the market multiple. They are demonstrating relatively resilient growth. Mobile ad sales growth is going to slow, which should be offset by an increase in Cloud spending which should go up quite significantly for the next 5 years. (Analysts’ price target is $967.70.)

They are big disruptors and are an important part of a portfolio. It is an extremely well run company and they reinvest intellectual capital to drive growth.

This is a shift to secular online advertising. Having the largest search engine, they usually garner a large percentage of any company’s advertising. In terms of actual online advertising, it only represents about 35% of their overall budget, so there is still a lot more room to grow as companies shift out of some of the more traditional forms of media on to online. Trading at about 22X forward earnings, and feels they can grow their earnings in the double-digit range. (Analysts’ price target is $967.70.)

This is one of these longer term stocks in which he accepts a bit of a pull back. It bases, breaks out, bases and breakout again. The worst case scenario is that it drops to the bottom of its base of about $700.

One of his favourite companies. Thinks it just cracked through its 52-week high. It was grinding for a little while back in 2015, because it looked like the company had gotten its eye off the ball with some of their moonshot ideas. However, the core business of ad revenue has been immense. He is not worried about this.

(Market Call Minute.) The stock has pulled back, so this is an absolute must buy.

(Top Pick Oct. 15/15, Up 20.19%) It has an excellent trend but it is rolling over a little bit. It should stop just below $780. He is holding it and thinks it will be good long term. The street likes it.

GOOGL-Q vs. AMZN-Q. He does not think AMZN-Q will pay a dividend. They are both equally interesting companies to own. AMZN-Q is going to reinvent retail. It is a unique story but you are paying a high multiple. GOOGL-Q is very interesting because if you are advertizing it is either GOOGL-Q or FB-Q and the former has a lead over the latter. They will continue to grow. You want to own both if you can find the right time. You have to expect volatility in both of them.

A huge disruptor that is changing many, many different industries. Trading at about 21X earnings and growing at about 20%. Has the ability to monetize mobile and continue to refine mobile and search and advertising along specific lines. Their ability to increasingly get into financial services, offering car insurance for example because they know exactly how you drive.

With the size of the company is the rate of growth they are able to accomplish. There is rising earnings and falling valuation. This is a nice comfortable place to be. It has consolidated for 6 months and is a good place to get in. They even have a division with a mandate to cure death.