This one investment is in my long-term portfolio | Smart Change: Personal Finance

(James Brumley)

No one loves chasing the next great story stock more than I do. But let’s face it — too many of these companies never live up to the hype. The obvious names of the market tend to be the workhorses of most portfolios.

With that as a backdrop (and while the market is deep in the red), here’s a closer look at one of the few names I want to keep forever. You may want to consider adding it to your collection of long-term investments as well. That’s especially true, as this stock has not only tracked the market lower since the November high, but it also led to a bearish attack with a 26% loss.

That stock is Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG)

Image source: Getty Images.

Practically unstoppable

Older companies with their best growing years 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. Throw in the fact that Amazon now threatens Alphabet’s advertising business and the bullish case weakens further. Meanwhile, Alphabet’s YouTube is also losing market share to countless new, free streaming platforms.

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Except that Alphabet is a cash cow, regardless of the maturity of the internet advertising market. Led by its advertising business, the company has posted lower year-over-year revenues in just two quarters since 2010, and one of those times was the second quarter of 2020, when the COVID-19 pandemic began to hit North America for the first time. to tear. Plus, it ended that sales freeze just a quarter later.

Data source: Thomson Reuters. Chart by author. The sales data is in millions of dollars.

It’s not hard to figure out why Alphabet is such a reliable grower when it seems like it shouldn’t be: The world is astonishingly dependent on the internet, and increasingly so.

A report from data analytics firm DataReportal says there are now 4.95 billion regular internet users on the planet, up from the total of 4.66 billion in 2021. That means there are still about 3 billion people who would eventually be able to access the Internet and then use it. And like most existing internet users, newcomers tend to choose Google as their preferred search engine. Global Stats’ StatCounter indicates that Google accounts for 92% of the search market and that Internet Live Stats says they generate more than 8.5 billion web queries every day.

That’s more than a business. Google is a cultural attraction that also happens to be a toll booth.

Some would argue that the world’s shift from desktops 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 the world’s mobile devices, leaving the company with significant control over how those users use their devices. Notably, Alphabet conveniently directs the 3 billion people who use Android to the company’s app store, Google Play, and for most smartphone manufacturers, Android, Google, and Google’s Chrome browser are the default search engine and browser options, respectively.

These little things make the company more than a means of connecting and then navigating the entire internet.

Even Alphabet’s YouTube is more than just a platform. The video storage has more than 2 billion monthly users, who together consume more than a billion hours of digital video every day. Indeed, for 35% of YouTube users in the US, Google’s President of Americas and Global Partners Allan Thygesen recently explained, it’s the only video platform they tune into. That’s a pretty powerful reach, even as more free, on-demand video options like Peacock or Pluto TV begin to shrink YouTube’s share of the ad-supported video market.

Digital platforms avoid most inflation risks

Alphabet isn’t the only company of this kind, mind you. I’d say Amazon’s super-easy shopping service is another revenue-generating lifestyle platform that consumers support without a second thought. walmart is similarly cemented in the psyche of shoppers, and if you think about it for a moment, you would surely find more.

For me, though, Alphabet is the go-to stock for a reason. While Walmart and Amazon are both struggling with high costs now and will certainly face those headwinds again in the future, Google, YouTube and Android are digital platforms that cost relatively little to share with the public. Advertisers and licensees ultimately foot the bill. Alphabet’s rates are just somewhere above the company’s costs. It’s not always great pricing power, but until the world is ready to give up its addiction to the Internet and all it offers, it’s always enough price power.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, serves on the board of directors of The Motley Fool. Suzanne Frey, an executive at Alphabet, serves on the board of directors of The Motley Fool. James Brumley has positions in Alphabet (A shares). The Motley Fool holds positions in and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy.

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