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Motley Fool: A growing giant

Google parent company Alphabet’s stock has been reasonably valued at recent levels, and is well worth considering for a long-term portfolio.  (Associated Press)
Google parent company Alphabet’s stock has been reasonably valued at recent levels, and is well worth considering for a long-term portfolio. (Associated Press)

Google parent company Alphabet (Nasdaq: GOOGL) (Nasdaq: GOOG) is a favorite among tech investors, largely because of Google’s dominant position in online search and advertising. Google is so much more than a mere search engine, though. It’s an entire ecosystem ultimately designed to monetize its users no matter how they use it.

Think about it. The world’s 1.5 billion-plus users of Gmail may love the fact that it’s “free.” But once logged in with their Google credentials, those consumers are automatically logged into the company’s other offerings, like Google Docs and Google Maps, as well as the Google Play app store – and YouTube, the world’s busiest video hosting platform, boasting more than 2 billion monthly users. All of that helps Alphabet build digital profiles of its users, which in turn helps Google show you highly targeted advertisements. And to top things off, Google’s Android operating system dominates the mobile device market.

Looking ahead, Alphabet has plenty of growth drivers. Google will continue to be a cash cow and should benefit from a recovery in the advertising market. Development in areas such as artificial intelligence and autonomous vehicles is going well, and despite regulatory pressure, the business overall remains solid. Even better, its stock has been reasonably valued at recent levels, and is well worth considering for your long-term portfolio. (The Motley Fool owns shares of and has recommended Alphabet.)

Ask the Fool

Q: What are “PBCs”? – S.F., St. George, Utah

A: You probably know about not-for-profit organizations and about regular for-profit companies. Public benefit corporations, or PBCs, are a relatively new kind of legal entity authorized in about three dozen states. They are permitted to pursue profit, but they’re also permitted to take the public good into consideration when making decisions.

They’re generally required to consider all stakeholders – including shareholders, customers and employees – when making decisions. The rules regarding PBCs vary by state, but they often give directors of a company the ability to act toward the greater good with some protection from liability.

Some well-known PBCs include apparel company Patagonia, shoe company Allbirds and fundraising enterprise Kickstarter.

Q: Is it better to invest money for my kids in stocks or in savings bonds? – H.K., Pierre, South Dakota

A: It all depends on how long the money will be invested. If you plan to withdraw it within a few years, perhaps for college, you should stick with relatively low-risk investments such as savings bonds or CDs. They offer modest returns and should minimize losses.

If the money will be invested for at least five (or better, 10) years, consider stocks, which tend to outperform bonds and CDs over long periods. A simple, low-fee index fund, such as one that tracks the S&P 500, will instantly spread your money across hundreds of large companies.

You might also invest at least a little money in the stock of some companies that your children know and like, such as Apple, Walt Disney, Target, Nike, Starbucks or Hasbro. If you follow the progress of such companies over time together, you can spark an interest in business and investing.

My dumbest investment

I bought shares of deep-water drilling company Seadrill in 2013 for about $25 per share. That was bad enough. But I bought more shares after they had fallen to $3 apiece – and then even more, for $0.81 apiece. – A.S., online

The Fool responds: There are some sayings in the stock market cautioning against what you did: “Don’t try to catch a falling knife” and “Don’t fight the tape.” The latter refers to old-fashioned ticker tapes, on which you might see the prices of a stock dropping over time. Both sayings suggest that when a stock is falling significantly, it’s best not to buy. That’s not always true – some stocks fall for temporary reasons – but others may face deeper problems.

Seadrill’s problems have been deep. Years ago, when business was good, it borrowed a lot of money to build more offshore drilling rigs, with the expectation that profits would soar and allow the company to pay off its loans. But then oil prices fell, the global drilling business slowed and Seadrill was left with billions of dollars in debt.

The company filed for bankruptcy protection in 2017, wiping out any value shareholders had in its stock. It emerged as a new entity, but it’s still facing challenges. The global pandemic, for example, has depressed demand for oil, and oil prices remain low. The new Seadrill may even file for bankruptcy protection again.

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