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⇒ Trading Alphabet
Why does Google (Alphabet) appeal to investors?
In the simplest terms, investing in Google offers people the chance to gain a stake in one of the world’s most successful businesses.
To get a full picture of its achievements, just step back and consider how the brand’s services feed in to your own daily routine. Whether it involves checking your Gmail account first thing in the morning, carrying out an online search for the day’s weather, or surfing quirky videos through the subsidiary YouTube, Google’s influence is never too far away. And that’s before you account for the fact that swathes of smartphones are powered by its Android operating system. Such is the brand’s influence that the phrase ‘Google it’ is now firmly established.
Follow Alphabet (NASDAQ: GOOG) publications and financial reports in their Investor Relations Page.
Alphabet’s revenues and share prices remain strong and steady, with online advertising a big contributor to its success. This makes the company particularly popular with investors seeking growth. However, unlike its big rival Apple, investors shouldn’t expect regular dividends from Alphabet. Rather than delivering shareholder pay-outs, it prefers to plough its earnings back into experimental ventures and technologies of the future – with driverless cars one example.
Who should include Google in their portfolio?
- Investors seeking growth potential. Alphabet has reported decent revenue growth over recent years, with Google generally viewed as a reliable, high-quality brand.
- Supporters of innovation and fresh thinking. The directors of Alphabet are constantly looking to innovate, piloting everything from autonomous cars through to VR headsets and the Google Home smart assistant.
- Day traders aiming to profit from short-term movements in Alphabet share prices. Contracts for difference (CFDs) provide one way to achieve this.
What services does Google offer?
Google’s services have become ingrained in our daily lives. From its search engine, email offering and Chrome web browser through to its mapping and Street View services, the brand has come to influence how we work, commute and socialise. Founded by university students Larry Page and Sergey Brin in the mid-1990s, Google was placed under the control of a wider umbrella company called Alphabet in 2015.
Alphabet has grown to become one of the most valuable companies in the world by market capitalisation, much like fellow technology giant Apple. So why does the Google brand remain so popular with investors, and how can Alphabet shares be added to a portfolio?
Alphabet’s shares explained
Two classes of Alphabet shares are available to ordinary investors, taking the ‘GOOGL’ and ‘GOOG’ ticker symbols on the Nasdaq stock market.:
- Those with the GOOGL symbol fall into the ‘A’ share class and provide investors with voting rights
- In comparison, those with the GOOG symbol fall into the ‘C’ class and don’t provide any voting rights
- There’s another class of shares (‘B’), containing non-public shares which are only accessible to company insiders
Although GOOGL shares are generally priced at a slight premium, they give investors a say over things like new product developments. GOOG shares simply provide people with a basic stake in the company.
How to invest in Google
Investors can add Google to their portfolios using two main methods. They involve:
- Simply buying A or C shares in Alphabet. While they don’t come cheap, shares in Google’s parent company can be purchased from a stockbroker or financial institution. Although Alphabet’s shares trade on the Nasdaq – an American stock exchange that tends to specialise in technology companies – the rise of online stockbrokers means you should be able to buy them anywhere with an internet connection.
- Entering a CFD that’s based on Alphabet’s shares. A CFD is an agreement you enter into with a broker to pay each other the difference between the current price of a particular asset and its price at a certain point in the future. Rather than buying an asset itself (in this case, Alphabet shares), you’re investing in the possibility of its price going up or down. CFD investments are available through eToro.
What influences Alphabet’s share prices?
- The following factors can all have a positive influence on the shares of Google’s parent company:
- Its reputation for forward-thinking. Given its sizeable share of the internet search market, Google could easily rest on its laurels and let the advertising money simply roll in. But instead, it’s already looking to get a foothold in the technologies of tomorrow, future-proofing its operations by branching out into areas like transport and healthcare.
- A strong core. The company has impressive cash reserves and a dependable advertising business at its core. This gives it the financial clout to invest in new innovations.
- Solid consumer demand. As consumers become more connected, the need for smart search engines, efficient browsers and accurate mapping tools isn’t going to disappear any time soon.
On the flipside, the following issues all have the potential to weigh on Alphabet’s shares in the future:
- The competition remains fierce. Amazon, Apple and Facebook are all investing heavily to keep their users within their ever-expanding ecosystems. This raises the possibility that consumers could increasingly bypass Google and head directly to the websites and services of its rivals instead.
- The continued lack of a dividend. With Apple launching a dividend in 2012, the pressure has increased on Alphabet to do the same. If no shareholder pay-outs are forthcoming in the near future, investor enthusiasm may begin to ease off.
- Uncertainty over the Trump administration. Donald Trump’s presidential election victory has thrown uncertainty over the future relationship between Washington and the big US technology companies.