Google Stock Analysis & Valuation (GOOGL)

Google Stock Analysis & Valuation (GOOGL) | Alphabet Analysis 2022

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Күн бұрын

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Today, I analyse Google (Alphabet) Stock and try to estimate its Intrinsic Value. I use the teachings of Warren Buffett and Nick Sleep to see if Google is a 'high-quality compounder', by looking at the Return on Capital Employed, the Return on Incremental Capital Employed and the Reinvestment Rate. Then, I talk about the length of the runway for Google and if it's something I'm currently interested in buying. To top it off, I do a quick Discounted Cash Flow Analysis to estimate the fair value for Google stock today.
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Пікірлер: 14

@perwis9893 2 жыл бұрын

After the excellent ROIC and Reinvestment rate of Alphabet I was surprised by your conclusion. Personally, I believe Alphabet is one of the strongest long-term competitive business there is. A defacto monopoly on search and Yotube is on its way becoming another defacto monopoly.

@investingiq 2 жыл бұрын

You're completely right! Don't get me wrong, I think it's an awesome business and I wouldn't have even done a video if it didn't smash my initial checklist. It's definitely a compounder and been a massive winner for shareholders the last decade. I'm just not 100% certain that it's a compounder going forward 15 or 20years. I'm about 90% sure, and the other part of me worries about the future of the advertising business, the runway to deploy more and more capital and the management team. Like I mentioned in the vid, I'm not really an expert on Google or advertising in general.. what's your thoughts on the competitive landscape for advertising going into the future? Do you think potential regulations could hurt the business. I'm completely open to changing my conclusion, especially with the price and market being where it's at! It's worth mentioning as well that just because I passed on it doesnt make it a bad investment. I just think there's better ones and my personal investing style as you know is Nick Sleep/Charlie Munger style - Extreme concentration. If I had a 15 or 20 stock portfolio, I guarantee you Alphabet would be in there. However, my framework is to concentrate on my best ideas and be extremely selective.

@perwis9893 2 жыл бұрын

@@investingiq I understand, I was just surprised by your opinion on Google/Alphabet. Most investors seem to agree Google is one of the best, "moaty" business ever. I too agree, and was therefore surprised by your contrarian opinion on Google. Somewhat ironically, I think many investors have the opposite view on AMD, and I tend to agree: cutting edge computation hardware seems to me to be an inherently competitive, unpredictable and almost commoditized business. That is the major reason I am reluctant to even do more research on AMD, in spite of you showing it shows the financial signs of a great business. For me, it it is still in my "too-hard pile". But I am tempted by your analysis of their ROIIC etc, and maybe you are right; the best investments are usually very contrarian. ;)

@investingiq 2 жыл бұрын

@@perwis9893 you're making me second guess my conclusion now ;) Haha I'm still on the fence with Alphabet, and I'll keep looking more into it. I agree with your points completely. Its definitely got a huge moat and will likely be around in 10+ years. The problem with the ad business for me, is being able to expand (once you have monopoly) Where do you think the long term 10+ year growth comes from to deploy capital and grow earnings? Because they're so massive, the amount in terms of dollars they need to grow by, just to double cash flow and capital employed in next 10yrs is huge. And that's only 7% CAGR growth, which I think it's roughly priced into current price. It's a great business for sure, but I just prefer compounders with long runways to reinvest most of their earnings at high rates of return. You might say what about Tesla, it's already at nearly $1T market cap? But like I mentioned in that video, the runway is still massive for Tesla to grow. They could probably 10x or more both their earnings and capital employed over next decade or 2.. well past what's currently priced in today (based on my assumptions). It all depends too on your investing style. Because I follow Nick Sleeps teachings, I try to look out 10 or 15years into future, because there's less competition as everyone's looking in the short to medium term. Most people would disagree with me (like they did with Sleep on Amazon & Costco) but that's kind of the point as you say lol Yeah I agree about AMD too. I feel if one's not familiar with their products or the industry it definitely seems that way. I personally feel like this is the place I really have an edge over Wall St. I've used AMD, Nvidia and Intel products for years and I feel really confident about AMDs future. They have a duopoly in both broad markets the operate in, and despite being outmatched in every operational and financial category (Capital, Employees, Earnings to reinvest, R&D) they still overtook Intel in CPU performance and architecture. This lead is still relatively new so it will take awhile to show up in market share but its slowly happening across all categories. Latest AMD keynote blew me away. Their next gen chips are insane. Then theres GPUs where they are slightly behind Nvidia, but not far and the runway for GPUs is just beginning outside gaming usage. I don't have many people to go back and forth with about companies so I appreciate you taking the time to comment! Thank you :)

@perwis9893 2 жыл бұрын

@@investingiq Great points. If it is one thing I have learnt as an early Tesla investor myself, is that I can have an edge over Wall Street if I make the effort to understand a business in depth. Another lesson from that experience is not to make an early dismissal of a business or an analysis (which most people still do about Elon/Tesla). Instead I just accept that "I do not know enough," and simply do not invest. (Therefore I don't think you made the wrong call on Alphabet, as I said I was only surprised about your conclusion) I try to go by the principle that I don't have to have an opinion on everything. Personally, I think this is a lot of the problem of "social investing" reflected in traditional media as well as in new media and social networks such as twitter and also KZfaq: everybody has to have opinions about everything! It is of course good to have a discussion with the intention to learn - I think it is critical to always try to expand my circle of competence. Your comment made me question my own judgment on Alphabet. I took it for self evident that it has one of the best moats in the business world, which is a risk in itself of course! I have to take a closer look, although I am not overly worried. For example, the general market for advertising is growing. I found this at Statista: "

@perwis9893 2 жыл бұрын

Damn too long comment. Here is the quote from Statista: "The global advertising market experienced some fairly turbulent times between 2000 and 2010, seeing growth rates as high as 11.3 percent as well as lows reaching -9.7 percent during that time period. However, since 2011 the situation has stabilized, and advertising spending growth remained on average at roughly five percent."

@chrisaustralianfinance9204 2 жыл бұрын

Always enjoy your videos Senan..very factual with alot of data to back up your opinions. Interested to hear you analyse netflix especially after the huge fall they had recently.

@investingiq 2 жыл бұрын

Thanks Chris! To be honest, most of it is heresay lol we can all look at the past data but predicting the future is another thing completely. It's so hard to predict accurately and know what a business will do. I imagine looking at Amazon, Nvidia, Netflix, Google etc 10years ago and how many people would have honestly been able to predict what they would achieve up to today. I heard something on a podcast with John Harris that when looking far out, you kind of need a fair bit of imagination. Netflix is one of the first stocks I researched when I started investing. At the time I thought it was pretty overvalued but it might be worth another look, given the 70% drop... I had a hard time assigning it a durable Moat though, alot of competition and as a user, nothing 'keeps' me on Netflix compared to disney, Amazon etc... what's your thoughts on the business itself and Moat?

@chrisaustralianfinance9204 2 жыл бұрын

@@investingiq business itself is great but the moat is not existent which ultimately will lead to its death in my opinion. Everyone stopped pirating shows because netflix had such a great range for a low price. Now everyone has come out with their own platform you'd be paying 100s per month to have them all, thus they have lost their competitive edge. It doesn't help that they keep raising prices but ultimately it's just going to end with everyone going back to pirating as if you pirate one show that's on a niche platform you may as well do it for all of them and save the money #dontasicme

@investingiq 2 жыл бұрын

Yeah I agree with you there! On another note, I read the new guidelines (info269) and I think creators like us should be ok. It's mainly to target creators who intentionally try to mislead their audience and/or give implied recommendations on a particular financial product e.g "Here's 5 stocks you should buy & hold" or "ETFs are guaranteed returns" For us, It's more about what you say rather than your thumbnail is. If I made another 'Top ETF's' video, I'm pretty sure I can talk about a particular product (say VAS for example) as long as I don't try to influence or recommend one ETF in particular, and I just provide the facts objectively like who the fund provider is, what the top holdings are, the fees etc (which I think I do). I mean, I do talk about the benefits of investing and the differences/benefits between passive and active, but I'm pretty sure that's allowed. Otherwise, saying anything at all about investing could be considered 'financial advice' Also, have you seen Reddit lol? People literally go there to get financial advice and it's given out in droves haha, so I think we'll be right.

@chrisaustralianfinance9204 2 жыл бұрын

@@investingiq I made a video about vanguard funds but I specifically say you can use other funds such as black Rock or beta shares, I'm just using vanguard funds in my example because I like vanguard funds. To be honest, there's on Australian youtuber that I think it's coming for that I can see talk about crypto although I know to date it only applies to stocks. It was originally to deal with asx wolf who was telling people to buy and sell individual stocks. That one youtuber in my mind I remember talked about a conservative 40% gain in crypto. Although I like their content, I think these absolute statements are dangerous and ultimately will result in regulation across all fields.

@mitchelljones2381 2 жыл бұрын

I’ve always liked alphabet and I’m always watching them but I’m same I think there are better companies. I love your knowledge and willingness to share . How did go with rate rise ? Any affect on your end ?

@investingiq 2 жыл бұрын

Thanks mate! I had a look but it doesn't really affect my investing philosophy at all. Buffetts been investing all his life, through Republican and democratic presidents, high and low inflation/interest rates and massive recessions, and he never really changed his investing plan when they occured. His style works well in almost any macro environment!