google stock is up more than 5 000 since it came public in the 2000s is
it too late for investors to get in let's run google stock through our
investing frameworks to find out my name is Brian Feroldi and my name is Brian Stoffel
thanks to stockcard.io for sponsoring today's video brian i doubt there's anybody watching
this that hasn't heard of google heck you're on a google property right now for those that
don't fully understand the company's business what does google do so google started out as a search
company but since then it has become so much more in fact it has nine different tools with over one
billion active users from maps to youtube and photos and android and it has the google cloud
for big public companies to use google didn't develop all these products in-house it acquired
youtube and android for example but the company does have a long history of creating or buying
products and then rolling them out to its billions of users and the company's products quickly become
incredibly popular beyond google's core businesses the company has also been investing money heavily
into a category that it calls other bets these are moonshot products that often have a very low
probability of success but if they do succeed they have the potential to deliver enormous returns for
shareholders as the time is recording none of the companies other bets have really paid off in a big
way but i love seeing that the company has this ethos built into it where they're willing to take
big risks on shots that have big potential so let's talk about how the company actually makes
money as you can tell from this chart that blue area right there is advertising why is advertising
so popular because when you have nine different products with over a billion active users you
are collecting gobs of data and advertisers are willing to pay big bucks for that data because it
means that their product will land in front of the right eyes on the screen even today advertising is
still responsible for the vast majority of google's revenue the hope in the long term
is that eventually one of those other bets pays off and that helps to drive the top plan higher
all right brian it's time to take it through your investing framework we're going to start
with the barbell method what is this company's mission statement it's to organize the world's
information and make it universally accessible and useful it's a little bit wordy but i really
like it i do too and the company has had this mission statement since day one and if you
look at all their decisions they have made them according to fulfilling this mission statement
let's take a look at the company's competitive position or its moat do you think that google
benefits from the network effect i do and i think it benefits from the network effect in two ways
first the company's search algorithm only gets better the more often it's used and the more
often it's used and the better it gets the more likely people are to just use google
second some of the companies properties like youtube benefit from the network effect we're
here right now because on youtube we know we can reach lots of people and then the people know that
there's lots of content on youtube so they come to youtube it's a reinforcing cycle great let's
move on to switching costs do you think there are any switching costs for google's customers or its
advertisers there are but i focus primarily on the customers and i don't think it's a super strong
one however if you use google to keep track of your calendar your photos things like that
if you're used to the android operating system then there are switching costs to consider when
you think about going to like ios or some or some other platform yeah brian just think about google
drive it's becoming a repository for everybody's work i mean i personally use google sheets
google doc google slides it's where i do all the presentations that we make including the one that
you're seeing today it would be a huge pain for us to switch away from it up next low cost
advantage do you think google has that going for it this is by far the biggest and most important
one that google has but what is the thing that they produce at a low cost it's data relatively
speaking it doesn't cost google all that much to service all nine of those tools that have over
a billion users but for what they put in to make sure they're still working compared to what they
get in terms of the data that they can then turn and sell to advertisers is enormous so this is
their key competitive advantage totally agree google produces gobs and gobs of data and the
rate of data that they're producing is actually accelerating nobody has more data than google
moving on to intangibles do you think the company benefits from a strong brand name or patents
yes when your company name becomes a verb you have brand value and we always talk about googling it
when you want to figure something out for sure 100 agree with you there all right the last one
counter positioning i don't think that the company benefits from counter positioning now 20 years
ago because they were kind of the vanguard of digital advertising we could have gone with this
but today that's not the case anymore fair enough when you add up those four categories of mode
they have working for them i for one think that google has an incredibly wide moat time to talk
optionality brian what do you see i see a lot so the company started with search that was one
tool that was very popular and then they developed eight other tools that were super popular so that
brings in lots of data then they've also got the google cloud so you throw that in there and then
as you talked about brian they've got these other bets and none of them have been a home run yet but
they're still there waiting and one of them could hit totally agree google has an incredible amount
of optionality built into it a huge reason why is their willingness to take on long shot products
through that other bet category time to move on to financial fortitude what do we see
as of june 30th 2021 the company has a huge cash position right now it's sitting at 136 billion
it only has 14 billion dollars in debt which is next to nothing for a company of this size and
then if we look at free cash flow over the past year the companies brought in almost
60 billion dollars google's financial resources are incredible unmatched by very very few other
businesses moving on to risks what do we see for concentration risk none to worry about does the
company have hundreds of thousands or maybe millions of advertising their platform none
of them account for 10 of revenue time for skin in the game what do we see on glassdoor
glassdoor the employees anonymously leave very positive ratings for this company sundar pichai
has really high ratings and overall 4.5 stars off of so many ratings is wonderful and that's off of
thousands of reviews these numbers are likely to be highly accurate that's no secret many people
know that google is a phenomenal place to work how about the founders are they still involved
they are i like to get pictures for this slide but i wasn't able to find a single picture of larry
page or sergey brin on the whole website however larry page used to be ceo sergey brin worked on
some of the other bets but now they're mostly just doing their work on the board of directors
yeah but they're still very involved in the business not so much in the day-to-day operations
but in the long term trajectory of the company moving on to ownership is there any skin in the
game here well it's funny you say they're still involved in the long-term trajectory because there
is skin in the game all insiders combined own about 12 percent of shares outstanding
however paige and brynn control about 52 of the voting rights so whatever they decide
to go with is what this company is going to do if you add up the value that all insiders hold as of
this taping it's worth about 220 billion dollars that's an incredible amount of money on the line
all right time to take it through my investing framework before we do we wanted to give a shout
out to our channel members thank you so much for choosing to join our channel it really means a lot
to us if you're interested in becoming a member of our channel you're going to get access to
badges and emojis you're going to get access to member only voting in which case if we determine
what stock we research from scratch next and we're going to start doing that twice a month
now if you're interested in becoming a member and getting access to those perks and more that we
have on the way click that join button all right brian time to tally up the score what did we get
for the mission score gave them full credit two points moat if you add up all four of the modes
that we had i gave them four and a half points and maybe i was even being a bit stingy this is a
wide moat business optionality i gave the company two and a half points and here's my one caveat
as soon as they prove that one of these other bets really can be a hit it would automatically go to a
three but we've been waiting for a long time which isn't surprising we know these are high risk high
reward bets but i'm just going to be cautious and wait until they hit that to give it full credit
fair enough financials what do you give them for a score if i could give higher than a one
i would but for consistency's sake we'll stick to a point great concentration risk nothing to
worry about okay glass door score wonderful reviews full credit founders both still on
the board full credit and ownership it's over eight percent so i give them full credit add
all that together and we get a 13. that is a very good score well into your anti-fragile category
it is very good and as i said i was probably being stingy that could be even higher than 14 over time
all right let's move on to my scoring system financially i gave this company a 14 out of
17. the only thing that held them back was gross margin on the moat score i gave them full credit
20 out of 20. pick a category this company has a very wide moat for potential i gave them a 14 out
of 18. i think their growth is going to slow in the near future until we see one of those
other bets pay off customer quality very high i gave them a 10 out of 10. revenue quality i gave
them an 8 out of 10. i'm not sure how much pricing power this company has given that we've seen the
cost per click come down over time but still i think this company could raise prices and not lose
customers management and culture perfect score 14 out of 14 stock score perfect score 11 out 11. not
only has the stock beaten the market consistently not only does the company regularly beat its
endless estimates but the company is also using its cash for to reward shareholders by buying back
stock and as for the risk section i subtracted four points three of those points were due to
antitrust concerns i do think that's one of the biggest risks that investors face today when
they buy google and i also took one point off for currency movements this company gets a lot
of its revenue from international markets you add all that together and alphabet aka google gets an
86 on my investing framework i think this is one of the highest quality businesses on the planet
i agree with you and my score of 13 reflects the fact that i have the same belief as you all right
brian it's time to hold ourselves accountable we're going to head on over to stockcard.io and
in both of our thumbs up portfolios that's your antifragile portfolio and that's my brand equality
score from work we're going to give this company the thumbs up to do so i'm going to click open a
new order we're going to put in the ticker symbol which is g-o-o-g i'm going to do a buy decision
on this today's date is monday october 25th this is a two thousand seven hundred dollar stock so
we're only gonna buy one share because of that it's gonna have a higher than average influence
on our scores that's just the nature of owning a company that trades in the thousands of dollars
and on your framework this scored a 13. and while brian goes over and he puts the same stock in his
own high quality portfolio we just want to mention that you can go to stockcard.io and you can look
up both of our portfolios to track how we're doing we want to point out that we think this results
over many years is the most important thing we aren't too concerned with where our portfolios
go over the short term however at the same time it is really important to hold yourself accountable
when you hold yourself accountable you learn and when you learn you get to be a better investor
in that vein you can go to stockcard.io and sign up to be a member there you can use the code
antifragile to get a discount and when you create your own portfolio on this platform you can track
how you do and let us know how you do versus our portfolios over time we hope you enjoyed that we
think that google is an incredibly investable idea and it's in both of our portfolios brian's out