How to Double Your Money in the Stock Market: Google It
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we had better-than-expected inflation data and unemployment data! And it didn’t matter. Mr. Market kept tumbling as Trump's tariff tirade trudges towards turmoil.
Investors hate uncertainty, and it is unclear which country’s goods will be tariffed, for how long, or what they can do to stop it.
Trump did provide some clarity on one economic policy this week, though. The Car-Salesman-in-Chief was sure to let the world know:
He’s buying a Tesla!
But enough mumbo jumbo. This is:
How to Double Your Money in the Stock Market: Google It
Trying to double your money? It’s mathematically simple. You want an average annual rate of return of 14.4% for five years.
Analysts (the people who get paid to predict this stuff) expect Google to grow its earnings per share at an annual rate of 12.5% per year.
Google’s price-to-earnings ratio is around 20. This means the current stock price is about 20 times its earnings per share.
The average company’s price-to-earnings ratio is around 26. This means the current stock price is about 26 times its earnings per share.
If Google meets analysts’ growth expectations and trades at a ratio still well below an average S&P 500 company, the stock price would double over the next five years. #math
Everybody hates Google. Haven’t you heard? The kids don’t use Search anymore, and ChatGPT is going to put them out of business?!
This is a compelling narrative. So compelling that Google has sold off to a dirt-cheap valuation. But ChatGPT has been around for a couple of years now, so we would probably see that show up in the financials, right?
(Spits out coffee)
Google Search grew its revenue by more than 13% last year. Double-digit annual revenue growth is incredibly fast. This doesn’t look like a segment that is falling off a cliff to me.
People love to predict not-safe-for-work Search results due to government regulations and competitors like ChatGPT or Bing. But it just keeps keeping on.
Google has plenty more than just Search anyway.
YouTube ads are growing at 15% per year.
Google Cloud is growing at 31% per year.
It takes an entire Wikipedia page just to list all of Google’s products:
https://en.wikipedia.org/wiki/List_of_Google_products
Google also owns the number one cyber cab company in the world, Waymo.
Geez. Sold off more than a third of its value this year and still at a price-to-earnings ratio over 100. Elon’s got Waymo problems ahead, ammiright?
At the Schmoozeletter, we go by the financials. We let the data tell the story.
The financials for Google are fantastic, and the valuation is cheaper than any other company its size.
Wondering how to double your money in the stock market? Google it.
Final Thought
Investing doesn’t need to be complicated. Buy exceptional companies at fair prices. Hold. Repeat.
