Google and YouTube owner Alphabet‘s (NASDAQ: GOOG) one of my favourite stocks. Since I first bought it for my portfolio in 2019, it’s nearly tripled in price. I just wish I’d invested in the S&P 500 company earlier. Had I done so 20 years ago when the company went public, I’d now be sitting on a fortune.
Life-changing gains
Yesterday (19 August) marked 20 years since Google’s Initial Public Offering (IPO). Over that period, its share price has soared.
When the US market opened yesterday, the stock – which was renamed Alphabet in 2015 – had risen 7,667% since the IPO, according to CNBC. That means had I invested £2,000 in the IPO two decades ago, I’d now have around £220k, once GBP/USD movements are factored in (the weak pound would have magnified the already incredible returns by another 40%, or so).
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Key takeaways
For me, there are a few takeaways here. For a start, it can pay to allocate some capital to individual growth/tech stocks. While investing in index funds and actively-managed funds can be a great way to build long-term wealth, they’re never going to provide these kinds of spectacular returns.
It can also be smart to take a global approach to investing and look at opportunities internationally. While lots of UK stocks have performed well over the last 20 years, not many have delivered this kind of incredible return.
Finally, taking a long-term, buy-and-hold approach to investing can really pay off. This stock’s had some wild swings over the years, but over the course of two decades, it’s done very well.
Worth buying today?
Is Alphabet stock still worth buying after these massive gains? I think it’s worth considering as an investment, especially after its recent pullback to the $160s.
Today, the company’s still growing at a healthy rate. Last year, for example, revenue rose an impressive 16%.
And looking ahead, I see plenty of growth potential. This is a company that operates in a number of high-growth industries including digital advertising, cloud computing, artificial intelligence (AI), digital healthcare, and self-driving cars.
It’s worth pointing out that there’s a bit of uncertainty due to ChatGPT. This could potentially disrupt Google’s search business in the years ahead.
However, I was encouraged to see that Google recently rolled out its version of ChatGPT, Gemini, on its iPhone app. This was a great move by the company in my view and it should help Google stay relevant.
As for the valuation, I think it’s very reasonable. Currently, the price-to-earnings (P/E) ratio’s 21.5, falling to 19 using next year’s earnings forecast. At those multiples, I think the stock’s capable of generating attractive returns in the years ahead.
Of course, I’m not expecting the stock to gain another 7,667% over the next 20 years. Investors looking for those kinds of returns are probably better off looking at smaller, up-and-coming technology companies.
