Alphabet Inc (GOOG)

(Market Call Minute) On her watch list. She might buy it on a pullback.

Google (GOOGL-Q) or Apple (AAPL-Q)? Given this choice, he would pick Google. On a balance sheet level, etc., they are very similar. Google is a software company whereas Apple is not so much, and gets about 60% of their revenue off of one product, the iPhone, and there has not been a real product from them for a long, long time.

Great balance sheet. Trading at a market multiple while it is growing at 3 or 4 times the rate of the average stock. Highly innovative. They own YouTube (media), Android and Search. Have 80% margins. An incredible company with highly innovative management team.

Compelling valuation, nicely priced. Forward PE of 20 and 18-20% growth. A dominant name. Have executed well in the Internet search area. 176 acquisitions over the last 5 years. They are transitioning well to the mobile space. Four out of five phones use the Android operating system.

She likes this. It is not super expensive. The biggest thing going against it is that it is Big, but when you actually look at what it is doing, it has transformed itself from a search engine to a very intelligent marketing machine. Still a lot of growth to come from this.

She was looking at this one quite closely when it got down to the $520 level. A leader in advertising/media, and they make a lot of money off their users. This is one that she would seriously consider putting in a portfolio. She is hoping for a general market pullback so she could get into this.

It doesn’t matter if you get the voting or non-voting share. They own the search market. They know a lot about their users. Better growth than anyone else and generating a ton of cash. The android operating system runs on 80% of the smart phones in the word and they give it away. If they ever monetize it, it would be tremendous.

If you can you should always buy voting shares. Thinks they set up the voting shares because they wanted to go out and make big acquisitions, not just with their cash which is enormous, but also with the currency they have with their stock. They’ll use their nonvoting stock to dilute it down so the voting stock will become more and more valuable. Has a tremendous cost of capital advantage, and will probably grow about 18%-20% per year. Trading at around 18X earnings, a marginal premium to the average stock, and yet it grows much, much faster than the average stock with a much, much stronger balance sheet.

An advertising juggernaut. The key to long term success for them is mobility and the ability to capture the attention of people in all places and through all devices. There has been a little bit of controversy over a “volume versus price” argument, what you pay for per click and what you’re volume is. Feels there has been a little bit of overreaction that their margins on the “pay per click” have been falling. Thinks this has been misunderstood. People when they are walking down the street are not going to be as active in terms of spending money, but that doesn’t mean over time they are not going to spend money. He prefers class C voting shares (GOOGL-Q).

GOOG-Q or GOOGL-Q? Which stock would you hold, voting or nonvoting? You always want to have a vote, because nonvoting shareholders tend to get brushed aside. In non-voting situations, individuals tend to want to get their hands on the shareholders’ cash and do unreasonable things. Of the tech companies that do not pay a dividend, this is the crème de la crème because the growth is still there. Even though the stock is trading in the $500 range, you are looking at 16X next years earnings so it is still relatively attractive.

Why do voting and non-voting shares trade for different amounts and which is better? Under the symbol GOOG, that is now a non-voting share (but owners have 10 votes per share.). An A share was developed under the symbol GOOGL which allows 1 vote per share. So on one you don’t have a vote and on the other you have 1 vote. Google has said that these 2 shares eventually will trade at the same price. If you are going to buy shares, buy the cheaper one.

Google (GOOG-Q) or Amazon (AMZN-Q)? If she had to choose, she would pick this one. It is on her watch list and is waiting for a pullback. Generates earnings so she is able to evaluate in terms of cash flow in terms of EBITDA.

Still executing very strongly in all areas. They spent $3.2 billion on net and have a lot of robotic companies. They are weighing in on a lot of the core key businesses. On this pullback alone, he would get the GOOGL-Q shares.

He did not buy this on the IPO because that was a speculation. It matured and the certainty improved. He would rather pay a much higher price for certainty. This has been a very successful investment for him.

They all came off over the last month and a half. Valuation is not that high given what they have. They own the search market. Would add to it if it comes off more.