There are thousands of stocks to choose from. This can be intimidating for investors seeking to invest their money to boost their returns. However, they can simplify the process.
For instance, investors can look at today's most successful businesses as a good place to start. It also helps to identify companies whose products and services they might use regularly. This is something that might work for them.
With that being said, if I could buy and hold only a single stock, this would be it.
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A dominant tech enterprise with multiple platforms
The business that fits the bill for me is Alphabet (GOOGL +1.71%) (GOOG +1.99%). It's a dominant tech enterprise that operates many powerful internet-enabled platforms.
Of course, there's Google Search, the leading search engine that has a 90% global market share. Investors are also familiar with YouTube, which commands the most daily TV viewing time in the U.S. among streaming services.
In the first quarter, Google Cloud, the world's third-largest cloud computing platform, posted 28% year-over-year revenue growth. It also brought in $2.2 billion in operating income.
Most investors realize that these powerful platforms lead to tremendous financial success. This business generated $19 billion in free cash flow in the last three months. And it's sitting on nearly $100 billion in cash, cash equivalents, and marketable securities on its balance sheet.
That unmatched financial position lets Alphabet dabble in less proven areas, what management calls Other Bets. The most notable operation among these is Waymo, the company's self-driving unit. It recently completed its 10-millionth paid trip.
Don't gloss over a key risk
The best investors understand the bullish factors regarding an opportunity. However, it's perhaps even more important not to overlook any risks. Knowing variables that can hurt a company helps an investor develop a holistic view of the situation.
I believe there's one notable risk with the company these days that can't be ignored: government intervention. It seems that all the major tech enterprises have drawn the attention of agencies in Washington.
NASDAQ: GOOG
Key Data Points
Alphabet might be stuck in the crosshairs like no other, though. On the positive, this indicates just how successful a company it has become.
Its dominance in the search and ad industries have been labeled illegal monopolies. The company has appealed, so it could take years for a final ruling. It's unknown how things will shake out.
But if Alphabet is forced to break up and divest some of its segments as a resolution, that could be a boon for existing shareholders. Imagine being able to own YouTube or Google Search directly. This could lead to meaningful value creation as interested investors pile into these new stocks.
Is Alphabet a "safe" stock?
Investing in stocks is inherently risky. No one knows what the future holds. Competition is fierce, and the best businesses of today might not be at the top in the future. But I'll go so far as to say that I think Alphabet might be a solid stock to buy and hold.
And that's why I hold it in such high regard. It provides crucial products and services to individuals and businesses across the globe. It benefits from the unmatched ability to collect data, and it has network effects. It's proving to be a leader in artificial intelligence. And it's in incredible financial shape.
The valuation is also attractive. Shares trade at a forward price-to-earnings ratio of just 18.1. Given that Wall Street consensus analyst estimates call for earnings per share to grow at an annualized pace of 12.8% between 2024 and 2027, I believe the current situation is compelling.
