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Google Has Many Positives

May 31, 2023 3:25 PM ETAlphabet Inc. (GOOG), GOOGL19 Comments
Eric Sprague profile picture
Eric Sprague


  • Google's acquisition of YouTube has generated nearly $40 billion in trailing twelve month (TTM) revenue, with AI providing advertisers with excellent results.
  • Google Cloud has overcome cumulative operating losses of nearly $13 billion and is now well-positioned to see meaningful operating income in the future.
  • Despite concerns about AI offerings cutting into Google's digital ad market share, the rapid growth of the digital ad market may offset any decrease in share.
Wooden easel with word Google



My thesis is that Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has many positives.

Acquiring YouTube for $1.65 billion in 2006, Google has transformed it into a business that generated almost $40 billion in trailing twelve month (“TTM”) revenue. The future is bright with YouTube as Google uses AI

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/we have a beneficial long position in the shares of GOOG, GOOGL, AMZN, VOO either through stock ownership, options, or other derivatives. 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.

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Comments (19)

Waymo will be a big gusher of cash in the future as Uber and taxi services use their technology.
@Billybobp unfortunately, market is rewarding non sense Metaverse and $3K headset from Apple that no one will buy. Sometimes, I like to ride on compounders that have little public interest.
Great analysis as usual; self driving cars will be a big cash gusher in th and e future
Samsara Growth profile picture
Agreed, thanks for your article, long 300 Google
A great business, with bad capital allocation. Billions wasted on the founders pet projects, share dilution, and excess cash. Compare Google’s 5 year return to Apple’s, and you see the massively different results of rational capital allocation. That said, it is still my 2nd largest holding.
Eric Sprague profile picture
@magalengo Yeah, few companies have been like Apple the last decade.
@magalengo Call it BS! Google has had very high ROIC in the past decade. Stock and ROIC could be decoupled. What has Apple invented in the past decade? Stock appreciated due to high FCF and buybacks. I see literally 0% growth going forward as people buy these phones conservatively and no other product in the pipeline.

There is a reason no fund manager bought Apple except Warren but for obvious reasons. If Warren buys junk unprofitable stock tomorrow, retail will pile on tht too. JS
GuyPardon profile picture
@Undervalued_pumper Apple’s ROIC is more than double that of GOOGL and the highest I ever saw. I hold both.
Billions of positives. Long.
Eric Sprague profile picture
@dynx Heck yeah!
Good article about a great company
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