Added small amounts to existing positions today in GOOGL at 1,195, FB at 173.2676, QSR at 41.38, VZ at 56.5288, CMCSA at 37.16, COF at 56.68, BRK.B at 187.72.
Here is my previous analysis/trades for all positions:
- Alphabet Inc A (GOOGL) – Buy
- Berkshire Hathaway Inc. (BRK-B) – Buy
- Capital One Financial Corp (COF) – Buy
- Comcast Corporation (CMCSA) – Buy
- Facebook Inc (FB) – Buy
- Restaurant Brands International Inc (QSR) – Buy
- Verizon Communications Inc (VZ) – Buy
I added to my position in Alphabet Inc A (GOOGL) on 4/3/2020 at $1090.895. Alphabet is still our 8th largest position at this time.
The resumed downward pressure once again makes for a good opportunity to add more or initiate a position. If it stays or goes down more I most likely add more.
Not much new to say that I haven’t mentioned in previous posts accept that it appears that interest in paid search still remains strong. eMarketer recently reported that when polled, most advertisers claimed that paid search was the most likely channel to be retaining budget or receiving new money, though only 24% of respondents said they were keeping money in search compared with 47% who said they were pulling it from display, for example. About two-thirds of respondents thought performance media would get more of a focus in the coming months.
Here is my previous analysis: Alphabet Inc A (GOOGL) – Buy
I added to my position in Alphabet Inc A (GOOGL) today at $1065.9456. Alphabet is now our 8th largest position at this time.
Better known as Google, I first bought Alphabet back in 2007 at a split adjust price of $230.44. I’ve wanted to get more over the years, but either missed the opportunity or felt the valuation wasn’t right. Finally, the price is at a level I’m comfortable with. I love to buy into companies where I spend a lot and ones that I feel are crucial to my life and/or business. Alphabet/Google is one of those. The problem has been too many others felt the same way and therefore were willing to buy at any price. However, now people are panic selling and selling everything even companies that stand to benefit from the current environment. It’s very irrational.
Alphabet is becoming a Berkshire Hathaway of sorts of the modern world in it’s collection of wholly-owned companies where it has a core competency in that also produce huge amounts of cash, which it then can invest in pieces of other great businesses.
It’s no secret that Alphabet does depend a lot on ad revenue that it derives from from it’s Google search business, Youtube and Adsense partners.
Here are just some of the Google products/ services that I use and depend on:
- Google Voice
- Google Ads
- Google Adsense
- Google Analytics
- Google Search Console
- Google PageSpeed Tools
- Google Alerts
- Google Drive
- Google reCAPTCHA
- Google Shopping
- Chrome Browser
- Google Business Listings
- Google Trends
- Google News
- Chromebook (hardware)
Other businesses that they are invested in through their CapitalG and CV divisions that I use/ depend on are:
They also own Nest, Waymo, Calico, DeepMind, Verily, Google Fiber and are invested in Uber, Lyft, CrowdStrike, Zscaler, DocuSign, Slack, 23andMe and much more. It’s really impressive just how much they are involved in and it’s even more impressive is the success of many of their investments.
Google Ads is my largest expense overall in my life. I have depended on Google Ads since it’s inception for the largest portion of our retail sales on the our own retail sites and it’s the primary promotion method we use for the majority of our marketing clients. I believe that even with a downturn in the economy, marketing budgets will be cut more elsewhere and proven marketing channels where you can better track conversions like Google Ads will be kept. Youtube is considered to be the 2nd most popular social media platform the last time I checked and should continue to be more popular in the “stay at home” economy producing more ad revenue as well as revenue share from paid media channels.
Over time, their other businesses and other investments should help diversify their revenue streams more and reduce their dependence on Google Ads revenue.
The valuation has finally come down to a level I’m comfortable with. The PEG is 1.21. Still a bit higher than I like, but under the 1.50 threshold I look for. Having watched the company for years I don’t believe the opportunity to get it at a much lower price is likely. If it continues to go down I will most likely add more.
FALLING KNIFE DEFINITION: A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment. Source: Investopedia
I do like the falling knives! I usually find the best opportunities in the companies who’s stocks fall hard, some deserve it, but sometimes is unwarranted panic selling. I got many of my current holdings this way. I bought the bulk of my Merchant’s during the last economic crash when all banks were being sold no matter how safe/dull their business practice was. Cisco (CSCO), Keurig Green Mountain (GMCR), GE (GE) Google (GOOG), eBay (EBAY), Apple (AAPL)… I bought my stakes in all of these when people were overly pessimistic on them.
Why Catch Falling Knives?
Often, you will have companies have some bad news, maybe an earning or sales miss, an unexpected one time expense… temporary problems even though the company’s business is sound, the stock will drop hard. This makes for a great opportunity.
Some of the ones I’m looking to buy now are Staples (SPLS), Merchant’s Bank (MBVT), 3D Systems (DDD), Stratasys (SSYS), Amazon (AMZN), AT&T (T), Verizon (VZ), Sierra Wireless (SWIR) – either for the fact that they have fallen a bit, but still have sound fundamentals based on the current price or have decent dividends which help keep a floor on further downward pressure with great potential for upside.
But generally right now I’m putting together a nice list of potential ideas while keeping a wait and see attitude, waiting for the right time to strike.
MBVT is one that I’ve consistently held a core position while trading around it. I like it at $28.50 or less usually. At the last stockholder’s meeting (which I still need to post my write up on) they mentioned they are in the process of completely upgrading their computer system which will increase efficiency, customer service and lower overall cost. However, the whole cost of this upgrade is expensed this year so it could scare people (which it looks like is already happening) that just look at the numbers… could create a nice opportunity there.