Things are starting to heat up in earnings season, and the big takeaway for me so far, with Alphabet reporting yesterday, is more confirmation that mobile advertising is making some fortunes for shareholders — so today I’ll check in with Google/Alphabet, add some thoughts about Facebook and Twitter (which have yet to report), and update my thoughts on Coresite and TGS Nopec, two other companies in our Universe (and in my portfolio) that reported this week.
In case you didn’t notice, Alphabet (GOOG) reported yesterday and made its shareholders very happy for the second quarter in a row. As I mentioned a few months ago, I used the opportunity brought by Google’s “we’re becoming Alphabet and starting to disclose more details to investors” announcements, and a widening spread between GOOGL and GOOG, to sell the more expensive voting shares and buy more of the non-voting shares, but that’s more nimble than I usually am — I’ve owned Google for more than ten years and see little reason to consider ever selling.
That’s still the smart move, I think, though it’s not going to “save your retirement” — since I made my small shift, GOOG is up 8.5%, GOOGL is up about 6%… the gap between them was 5% ($33, which was about 5% of GOOG’s then $656 price… meaning you paid a 5% premium to get voting shares that will never have a meaningful vote instead of non-voting shares that will never have a meaningful vote), it’s now about 3% at midday… I think it should narrow to 2% or less and stay there, which doesn’t mean I’d aggressively arbitrage that (sell GOOGL short to buy GOOG — that’s not worth it, the cost is too high and benefit too tepid, and the market can do silly things for long periods of time)… but it does mean that I’d suggest buying GOOG every time over GOOGL if you like the stock. Paying for a vote is foolish if your vote will never count, and GOOG and GOOGL shareholders will be treated identically by the company otherwise.
And should you like the stock? I think so. It’s not as cheap as it was, obviously, but adding a bit of cost controls to the company and separating out their experimental (but still high potential) businesses like self-driving cars to help investors understand the financials better is obviously working. ...