written by reader GOOG vs. GOOGL

By billc, July 30, 2018

I am considering to initiate a position in Google stock and looking for thoughts / opinions whether to buy GOOG or GOOGL. It appears (at least in TD Ameritrade) that the analyst coverage is rather thin on GOOG. GOOGL, on the otherhand, is covered by: Credit Suisse (outperform); The Steet (buy); CFRA (4 stars); Ford (sell); Market Edge (long). Travis, I noticed you are in GOOG… I imagine you had a rationale to your selection but missed where that write-up might be.

Any guidance, opinions or thoughts?

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Travis Johnson, Stock Gumshoe
July 31, 2018 4:28 pm

I haven’t written about that disparity in quite a while, mostly because the premium for the voting shares has finally eroded, but back in 2015 I shifted all of my holdings from GOOGL to GOOG because the non-voting shares (GOOG) were trading at a 5% discount to the voting shares (GOOGL). My rationale was that my vote was meaningless anyway, as are the votes of all other non-insider shareholders, since the founders effectively have a controlling voting stake with their super-voting shares… so why pay for a meaningless vote? That turned out to be wise, over the past three years GOOG holdings have enjoyed roughly a 93% return versus the 85% for GOOGL holders, simply because that discount narrowed from about 5% to less than 1%.

The current discount is much more rational, and there’s not really any meaningful gain to be made by closing a 0.8% discount, so I don’t feel nearly as strongly today as I did then… but I’d still lean toward buying the cheaper shares (GOOG), since the voting rights still don’t mean anything. All of my holdings in Alphabet, which I added to last week, are currently in GOOG shares. If the discount disappears entirely or GOOG for some reason trades at a premium, I suppose it would make sense to shift to GOOGL… but in truth, I expect that both share classes will perform essentially identically going forward.

Here’s that original note on the disparity from 2015, just FYI: https://www.stockgumshoe.com/reviews/smallcap-discoveries/friday-file-the-fat-pitch-for-2015/

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