Many exciting and fast-growing companies have stocks that are richly priced right now. But there’s still a bargain among them in Google parent company Alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL). Alphabet recently reported its second-quarter results, obliterating expectations with revenue up 62% year over year.
There’s a lot to like about Alphabet, such as its multiple (and growing) profit centers. It generates revenue from Google search advertising, YouTube ads and subscriptions, Google Network ads, Google Cloud services, the Google Play store, and its Pixel hardware offerings, among other things.
The company is a free-cash-flow machine, generating more than $58 billion in the past 12 months. While the stock doesn’t pay a dividend, it has still rewarded shareholders by spending a lot of its cash on stock buybacks, reducing the overall share count and thereby making each remaining share worth more.
It’s reasonable to worry about Alphabet’s legal battles over anticompetitive practices; antitrust lawsuits could eventually break up the tech giant into smaller pieces. Even if a breakup happens, shareholders will likely receive shares in the new entities.
Alphabet still has plenty of sustainable growth left in the tank as multiple growth trends propel the business higher. (The Motley Fool owns shares of and has recommended Alphabet.)
Ask the FoolQ: Can you explain what “closed-end” funds are? – F.E., Dothan, Alabama
A: Closed-end funds (CEFs) are similar to mutual funds, but with a twist. Both collect dollars from investors and deploy them into investments chosen by professional money managers.
But when closed-end funds are created, a set number of shares are sold to the public, raising a fixed amount of money.
After that, the shares generally trade in a secondary market, like stocks do.
Also like stocks, their prices are based on supply and demand, unlike traditional mutual funds, whose prices are based on the values of the securities (such as stocks and bonds) they hold.
If you buy shares of a traditional mutual fund, your dollars go to the mutual fund company, which will issue more shares and invest that money; when you sell, it will redeem your shares at the fund’s current net asset value (NAV), less any fees.
But when investors buy or sell CEFs, they transact with other buyers or sellers, not with the CEF company.
Closed-end funds come in several varieties. They can be volatile, occasionally charging high fees. Learn more before investing in any, starting at Investor.gov.
Q: What are “esports”? – D.H., Broken Arrow, Oklahoma
A: Esports are, as you might have guessed, sports played online – in the form of video games, such as League of Legends and Overwatch.
They’re not just for players, though – esports also feature spectators, with dollars flowing from sponsorships, advertising, ticket sales, media rights and more.
Esports have become increasingly popular in recent years, with tens of millions of viewers and some teams valued at hundreds of millions of dollars.
One estimate is that the industry will rake in $1 billion in 2021.
My Dumbest InvestmentMy dumbest investment was in a small solar power company.
I bought into it during its rise and held on.
Then, while the stock was going down, I kept pouring money into it, thinking that those were good buying opportunities.
Later, it was announced that the company would be acquired by another company; shareholders would receive shares of the acquirer, but at a lower overall value.
The merger was canceled, but I learned all kinds of lessons via this experience.
I stopped chasing cheap stocks and invested more with long-term growth in mind – that’s my ultimate goal, anyway. – Andy, online
The Fool responds: It’s a common mistake to think of low-priced stocks as “cheap” bargains – especially those trading for less than $5 per share.
Those are called penny stocks, and are often very volatile and risky.
Your stock spent most of last year trading not only below $5 per share, but often below $1 per share. Recently it had a market value of only about $200 million.
Focus on finding high-quality, growing companies, and aim to buy them when they’re attractively priced.
Then, hold them for many years or decades – as long as they remain promising. That kind of long-term mindset can reward you well over time.
Don’t be afraid of buying high-priced stocks; they can still double and triple in value – or more.