Top Picks 2017: Alphabet

01/25/2017 6:00 am EST


Ingrid Hendershot

Founder and President, Hendershot Investments, Inc.

Our top growth-oriented pick for 2017 is a company that is a collection of tech businesses, the largest of which is Google, explains Ingrid Hendershot, money manager and editor of Hendershot Investments.

In addition to the search engine operations, Alphabet (GOOGL) also includes businesses known as the “Other Bets”.

These operations are currently unprofitable but making important strides in their various industries such as driverless cars, healthcare and other innovative ventures.

Meanwhile, Google's strong global brand is one of the most recognized in the world.

Its core products such as Search, Android, Maps, Chrome, YouTube, Google Play and Gmail each have over one billion monthly active users. Most of Google's products and services are free for users.

The majority of the company's revenue comes from advertising as Google's proprietary technology automatically matches ads to the content of the pages on which they appear.  

Thanks to the growth of the digital economy and the shift of consumers and advertisers from offline to online, Google has generated outstanding growth which continued in 2016 with more than 20% growth in third quarter revenue and earnings.

Despite investing heavily in data centers, the company's free cash flow jumped 94% in the third quarter with the company ending the quarter with more than $83 billion in cash on its ironclad balance sheet.

Management announced a new $7 billion share repurchase program during the third quarter.

Long-term investors should “google” Alphabet, a high-quality company with a strong global brand, outstanding growth and robust cash flows. Buy.

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