Ah, the S&P 500. A place where fortunes are made, lost, and sometimes found again behind the sofa cushions. But among the rollicking waves of Wall Street, there’s one mighty ship I’m determined to sail with until I’m old and grey (or at least until I can afford that yacht I’ve been eyeing). Ladies and gentlemen, I present Alphabet (NASDAQ: GOOGL).
Diverse growth
Let’s start with the obvious. Google is to search engines what Kleenex is to tissues. It’s not just a product, it’s a verb. When was the last time we heard someone say “let me Bing that for you“? Exactly. With a staggering 91% of the global search market, Google isn’t just winning the race, it’s lapping the competition.
But Alphabet is more than just a one-trick pony. YouTube? That’s Alphabet. Android? Alphabet again. Chrome? You guessed it. The company has fingers in more pies than a clumsy baker.
The company’s balance sheet is more than impressive. In the last year alone, the firm raked in a whopping $328bn in revenue. That’s more than the GDP of some small countries. And it’s not just hoarding its $100bn in cash like a dragon on a pile of gold. Strategic investments are being turned it into profit faster than I can say ‘ad revenue’. With a net profit margin of 26%, they’re not exactly growing slowly either.
A bright future
From my perspective, management isn’t content with ruling today’s tech world. With artificial intelligence, self-driving cars and cloud computing, the firm is directly competing with Tesla, Amazon and Microsoft.
And let’s not forget the company’s Other Bets category. It’s like the firm’s very own mad scientist lab, cooking up the next big thing. From internet-beaming balloons to life-extension research, the team is throwing spaghetti at the wall of the future, and quite a bit of it seems to be sticking.
As if all that wasn’t enough to make an investor curious, the shares recently started paying dividends. Sure, at 0.5% yield, it’s not exactly going to let investors retire to the Bahamas tomorrow. But it’s a start, and it shows the company is confident enough in its cash flow to share the wealth.
It’s worth noting there are still plenty of risks. Is the company perfect? Of course not. No company is. It faces enormous challenges like antitrust scrutiny and the ever-present threat of technological disruption. As generative AI becomes the norm, it’s not clear how traditional search, and associated advertising revenues will be impacted. I fear there’s also a risk that management is forced to spend even more than expected to keep up with investment from competitors in the rapidly growing AI space. After a period of tremendous growth in the shares, any such shock could spark a sell-off.
The bottom line
That said, Alphabet is the S&P 500 stock I plan to hold on to tighter than a toddler with their favourite teddy bear. To me, it’s not just a company, it’s a ticket to the future. And I, for one, am buckled up and ready for the ride.
