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Google Is Enjoying Competitive Advantages

May 06, 2021 8:13 AM ETAlphabet Inc. (GOOG), GOOGLAAPL, AMZN, SHOP, META, MSFT, SHOP:CA8 Comments
Eric Sprague profile picture
Eric Sprague


  • Google is able to get a large number of search customers through their Chrome browser along with rev share agreements for Safari and Firefox browsers.
  • The high cost of indexing is a barrier to entry for new search competitors.
  • The enormous user base at Google search is a competitive advantage.
Google search page in the internet
Photo by tomch/iStock Unreleased via Getty Images


My thesis is that Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is an important company for the U.S. that is set up to continue enjoying competitive advantages for many years.

Berkshire Hathaway (BRK.A) (BRK.B) Vice Chairman Charlie Munger praised U.S. tech

This article was written by

Eric Sprague profile picture
I'm an individual investor heavily influenced by Warren Buffett and Charlie Munger. Munger's 1994 USC Business School Speech is something I think about a lot: ### Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result. ... Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you're going to buy something which compounds for 30 years at 15% per annum and you pay one 35% tax at the very end, the way that works out is that after taxes, you keep 13.3% per annum. In contrast, if you bought the same investment, but had to pay taxes every year of 35% out of the 15% that you earned, then your return would be 15% minus 35% of 15%—or only 9.75% per year compounded. So the difference there is over 3.5%. And what 3.5% does to the numbers over long holding periods like 30 years is truly eye-opening. If you sit back for long, long stretches in great companies, you can get a huge edge from nothing but the way that income taxes work. ### Feel free to follow me on twitter: https://twitter.com/ftreric

Analyst’s Disclosure: I am/we are long GOOG, GOOGL, AAPL, AMZN, BRK.A, BRK.B, FB, SHOP, TSLA, VOO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Any material in this article should not be relied on as a formal investment recommendation. Never buy a stock without doing your own thorough research.

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Comments (8)

Do you view Microsoft edge browser and Bing search engine as a threat to Google’s chrome browser and search engine?
caltiger profile picture
Useful write-up Eric. Please consider writing "deep-dive" topics such as on 'Waymo", or advances that Google is making on AI_ML, etc. Thanks.
Eric Sprague profile picture
Thanks for the comment, @caltiger! I'll make those considerations for future articles. Best, Eric
I’m convinced. Time to add a few more shares. (Actually I was getting ready to buy some shares on this pull back but nevertheless thanks for a very good article.)
smadadet profile picture
Anyone who uses Google apps for anything is just plain foolish. They are collecting so much information about you that should be kept private.
@smadadet good luck using DuckDuckGo for your everyday search. Just learn to fool the Googlers by searching for diapers even though having no kids.
#sticking it to the man
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