My sister, an investment neophyte, recently asked me what’s the one stock I’d recommend buying.
Apple (AAPL), she wondered? No, I said. Apple’s best days are behind it.
Facebook (FB)? Not a bad choice, I said. But I’m not sure how popular Facebook will be 10 years from now.
Google’s Alphabet Inc (GOOGL, GOOG) was my answer. Google is the hottest company, with a diversified product lineup and sales that are growing more like an upstart mid-cap. Plus, Google stock has held up quite well in the midst of the market’s worst slump since the recession.
Shares of Google stock are up 28% in the past year, at a time when the S&P 500 and Nasdaq have each fallen 12.8%. Apple, by the way, is down 26% in that time, having seemingly peaked at $132 a year ago almost to the date.
GOOGL Now the Top Innovator
Not long ago, Apple could do no wrong. Consumers and investors alike gathered around their computer screens every time Steve Jobs or Tim Cook would stand on a stage and unveil the company’s latest innovation. Those top-secret product launches were almost an automatic 10 to 15% pop in Apple’s stock price.
Now, Apple’s products have grown stale. The company keeps churning out new versions of its iPhone, but the difference from the iPhone 4 to the 5 to the 6 and 6s are no longer eye-popping enough to make consumers’ collective jaws drop. As a result, sales and earnings growth at the world’s largest company have slowed to a crawl, a mere 1.7% and 7.2%, respectively, in the most recent quarter.
Google, meanwhile, has snatched the reins from Apple as the world’s most prolific innovator. From the self-driving car to the connected home to its budding biotech business to its own line of Android smartphones, Google has become far more than just a search engine — even though its search engine dominates like never before, with a global market share of 89%.
Not all of its innovations have worked. (Remember Google Glass? Probably not.) But many have, and the fact that the company is willing to innovate and try new things keeps it fresh in the eyes of consumers — and more importantly for our purposes, investors. It’s a big reason why Google stock has risen 124% in the last five years.
Even at more than $700 a share, I say GOOGL’s best days are still ahead of it. As the company diversifies its product lineup on a seemingly weekly basis, it is becoming less vulnerable to weakness in any one area.
The company consistently achieves double-digit sales growth, having done so for six years running. Earnings per share improved at a healthy 8.7% clip in 2015. And it has $68.5 billion in cash in its coffers — or $99.71 per share — with just $7.7 billion in debt.
Just about any way you slice it, Google is the picture of health financially. Perhaps more importantly, the image of GOOGL on Wall Street is that of a growing, diversifying company. Apple is looking more and more like a company that has already peaked, like Microsoft (MSFT) or IBM (IBM) before it.
Google Stock: Poised for Even Greater Returns
Think of it this way: Apple has been around for 40 years, and has been a public company for 35 years. The stock didn’t truly hit its stride until 2004. In the decade that followed, the returns in AAPL (nearly 6,000%, an average of close to 600% a year) were unprecedented.
Google has only been around for 18 years, and been a public company for less than 12. For most of that history, it was merely a search engine. Today, it’s much more than that. What will it be five, 10, 15 years from now?
The possibilities are tantalizing. And that’s why I’m telling you now what I told my sister: Buy Google stock.
As of this writing, Chris Fraley did hold a position in any of the aforementioned securities.
