Alphabet (GOOGL) — our Top Pick for 2021 — has far outpaced the broad market so far this year, rising 41%, observes Chuck Carlson, editor of DRIP Investor.
The performance is especially impressive when you consider the performance of other technology/Internet stocks this year. Helping to fuel the gains is Alphabet’s position as a “value” growth stock.
In other words, the company has continued to put up very strong earnings and revenue growth, yet the stock’s valuation — these shares trade at just 27 times their 2021 earnings estimate — is fairly moderate versus the rest of the tech/Internet sector.
The company has obliterated consensus earnings estimates in recent quarters, and earnings estimates have risen sharply in the last 60 days. Earnings should get a strong boost in the second half of the year with the reopening of travel in the U.S. and abroad.
Indeed, travel accounts for some 10% of Alphabet’s search revenue, so a rebound in travel will help move the needle on search revenues. Providing a kicker to long-term prospects is the firm’s growing cloud-services business.
The reasons I chose Alphabet as a 2021 favorite — strong operating momentum, reasonable valuation, the ability to generate positive earnings surprises — still hold for the remainder of this year. I expect these shares to continue to outpace the broad market and rank them a strong “buy” for any portfolio.
Please note Alphabet offers a direct-purchase plan whereby any investor may buy shares directly. Minimum initial investment is just $25 in the plan, making the stock accessible to virtually any investor.
For further information on Alphabet’s direct-purchase plan, visit the transfer agent, Computershare, at www.computershare.com.
