September 9, 2012 in City

Motley Fool: Google’s future appears bright for stockholders

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Associated Press photo

Attendees await the morning keynote address at the Google IO Developers Conference in San Francisco in May, 2011.
(Full-size photo)

Google is not a one-hit wonder.

The company built its dominance on search, delivering relevant information to those who seek it. It monetizes this through advertising, which remains 96 percent of its revenue today.

Given Google’s failure to turn Gmail, YouTube or Android into cash cows, some wonder whether it will ever branch out beyond search-based products. It might not have to, though, since its position as the gatekeeper between a user and information gives it significant value, power and advantage over competitors.

Google has seen many successes. Gmail claims 425 million users, compared to Microsoft’s Hotmail at 325 million. Google’s Chrome browser went from 0 percent market share in 2008, to having the majority of the market at a little more than 33 percent. Microsoft’s Internet Explorer comes in a close second at a little under 33 percent.

Eventually, some of Google’s new products will turn into moneymakers. In the meantime, via acquisitions, Google can bank on the ideas of others that were developed outside the company. It has acquired 60 companies since the start of 2010, including Motorola Mobility, which can help it expand in the hardware realm.

The stock isn’t the bargain it was a few months ago, but its future is promising. Perhaps at least keep an eye on it as a possible candidate for your portfolio. (The Motley Fool owns shares of Google and its newsletters have recommended it.)

Ask the Fool

Q: Can I buy fewer than 100 shares of stock in a company? – E.M., Biloxi, Miss.

A: Yes, indeed. You can usually buy as little as one share at a time. But be sure to pay attention to the commissions you pay your brokerage – if you buy one $45 share of stock and pay a $15 commission, you’re out 33 percent from the get-go. It’s sometimes best to accumulate cash and buy a bigger stake.

If you’re buying stock directly from a company, such as through a dividend reinvestment plan (a “Drip”), your money can buy fractions of shares at a time. For example, a $30 contribution would buy you half a share of a $60 stock. Learn more about Drips at fool.com/School/DRIPs.htm, dripinvesting.org and dripinvestor.com, and more about picking a good brokerage at broker.fool.com.

My dumbest investment

Years ago, I watched Sun Microsystems’ stock price fall to $12 per share, and then $9. I bought a lot of shares. When it rebounded to $12, I felt like I’d really made a score! But weeks later, it sank quickly to $5 and then to $3.25. I sat with my $9 shares under water for a long time. I played my cards and lost. I’m now more cautious about buying something that I swear “can’t go any lower.” Now even shares at $2 or $3 I get nervous about. – T.K., online

The Fool responds: First off, be careful if you’re thinking about investing in gambling terms, such as playing cards. Many do speculate wildly in the market, but successful stock investors often see themselves as part-owners of carefully selected businesses, aiming to hold on for years. And as you learned, even seemingly very low prices can keep falling. You need to read up on the situation and see how likely a recovery is.


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