Alphabet Inc (GOOG)

The leading search engine company, and is really about online advertising. This garners a huge share of the search traffic. On online advertising, on a global basis, only about 35% is allocated within the overall budget, so she thinks there is good growth opportunity going forward and Google will garner a high share of that.

Amazon (AMZN-Q) or Google (GOOGL-Q)? A tough one. It is the battle of the Titans. He would own both. He likes to buy companies that are disruptors and the change industries, and both of these have clearly done that. You could also buy the ETF (PNQI-Q) which is an Internet-based ETF giving you a basket, or FDN-N, the retail ETF.

He likes it. It is one of the stronger technical plays. It has a lid around $800, which it will eventually break. It may meander up and down before it breaks out again.

Technology comes into a period of seasonal strength from April all the way through to July. These companies all tend to have a run up higher into their developer conferences. This one’s conference is May 18-May 20. The seasonal strength is between March and July, and the average gain is about 17%, and has been positive in 9 out of the 11 periods. The technicals are still quite positive on this.

They own Search and are monetizing exceptionally well. Margins are starting to come higher. They are getting the earnings growth that they have wanted for a long time. Generating free cash flow and redeploying it into very strong acquisitions. On top of that, they own the best and one of the largest operating systems in the world, the Android Operating system. They are giving this away for free right now, but at some time they will monetize this.

(A Top Pick Feb 20/15. Up 37.27%.) He is not enthusiastic about buying this at $700 a share, but it is still a wonderful company. They are super-smart.

GOOGL-Q is a core holding. It is doing better than it had been because they are not spending as much money as they had. They have three things going. They are closing the gap between ads they can sell on desktops vs. mobile. Their expense growth is continuing to moderate and they are seeing increasing business from Googleplay and YouTube. 21 times earnings and bottom line growth of 17%.

His model price on this is $557, 21% lower than the existing price. His program is calling for it to be $806 next year.

The value of Google goes up and up and up. You can put it away and forget about it. This is a hard stock to trade but an easy stock to own.

Valuation looks very attractive relative to other growth oriented technology companies. Trading at 21X forward earnings with a 16% long-term growth rate. Has a 1.3X PEG ratio, which is very cheap in the S&P 500. They control 73% of the search engine space in the US, and over 50% of the global search ad revenue. Those things are going to grow organically. The new CFO is doing a lot of great things to help with transparency. Down 9%-10% year to date, which is a pretty good buying opportunity.

Google is responsible for 64% of all searches done on the Internet. As traffic grows on the Internet they continue to benefit. They are in the middle of the shift in the spending in media and are getting the lion’s share of the revenue for advertizing. Its revenue is accelerating and their margins are improving. They own YouTube. He likes defense companies because you never really know what ELSE is in there that can come out and generate revenue later. Google is the greatest brain child. It has pulled back 10% but is firmly in an uptrend.

The company has not been around long enough to give a seasonality assessment. However, the technicals look reasonably good. The chart shows that it is in an upward trend and is outperforming the market. In the last couple of weeks it has had a bit of a difficult time, but the scenario is quite positive on a technical basis. Watch the technicals very, very closely. If they show signs of rolling over, that will be an opportunity to take some profits.

(A Top Pick March 10/15. Up 26.26%.) Loves the company. Reported excellent earnings. This is one of the juggernauts that you just have to continue to own.

This had a big pull back to $700. Reported a great quarter last week. This is the biggest online search company, and online advertising is a secular growth industry. Thinks it still only represents about 30% of the overall ad-spend when a company looks at their advertising budget, and it should increase over time. With this company’s dominance in search, they will get a larger share of that advertising budget. Thinks earnings can grow in the 18%-20% range for the next few years. Trading at a 20X multiple, and a 1.5 PEG ratio.

Feb 1 is earnings date. It is the first time we get enhanced disclosure. When companies enhance their disclosure, there is a bit of a coming clean and it possibly costs more than people think, but then there is the core business coming clean. You end up seeing a better trajectory for earnings growth. Near term there is some room for an uplift.