Why Google Stock Is Trouncing the Market in 2013

The first six months of 2013 have been good to Google (NASDAQ: GOOGL  ) and those who hold Google stock. Though we Fools know that six months doesn't make or break an investing thesis, it's always good to periodically check in on your holdings.

And if you hold Google stock, you've got to be pretty happy with what you've seen thus far.

GOOG Total Return Price Chart

GOOG Total Return Price data by YCharts.

Though Google was about even with the S&P 500's return back in mid-April, it has surged nicely and is now outperforming the market by over 11 percentage points on the year. If we take a closer look at the events of the last six months, three dates in particular stand out.

Source: YCharts.

In late January, Google came out with an earnings report that pleased Wall Street. Revenue increased a whopping 36% year over year -- though that would have been a more tepid 22% without the Motorola acquisition -- but earnings per share jumped just 5%. 

Though it might seem troublesome when a company's earnings growth doesn't at least match its revenue growth, ever since CEO and co-founder Larry Page took the helm, he has telegraphed that the company will be spending money to build out its infrastructure and develop a cohesive mobile advertising strategy.

What really pleased investors was the fact that cost-per-click values began to stabilize. As Android has been able to deliver more and more mobile advertisements, investors worried that the amount businesses paid for these ads would continue falling. But when Google came out with these numbers, it became easier to see how Google's future was still bright in light of a shift to mobile advertising.

Source: YCharts.

When first-quarter earnings came out in mid-April, the good news continued. Revenue increased by 31% year over year -- though, again, it would have been 22% without the Motorola acquisition -- and earnings per share jumped 13%. 

Though cost-per-click showed a little weakness -- dipping 4% from the previous quarter -- the overall number of paid clicks increased by a dramatic 20% over the previous year. Furthermore, CEO Larry Page spent a lot of time on the conference call talking about "big bets" that the company was willing to make -- a la YouTube, Android, Chrome, and even Google Glass -- in order to continue driving innovation in the technology industry.

Source: YCharts.

Finally, we have Google's annual developers conference. Though there were no mind-blowing revelations, the company announced five initiatives that investors clearly liked:

  • Android and Google Play: a subscription-based music service.
  • Chrome's new voice-activated search
  • Google Plus upgraded its photo-sharing capabilities
  • Chrome's upgrade to allow for faster video streaming and payments
  • The next iteration of Google Maps

As the father of a newborn, I especially appreciate Chrome's new hands-free, voice-activated search function (though I doubt that alone accounted for Google stock's continued climb).

In the end, the real story here is simple: Google has shown it can be profitable in the digital age, and investors are confident the company will continue to look for ways to innovate.

That's why Google has a leg up on the competition when it comes to the technological battle for future relevance. If you'd like to read up more about this battle, I suggest checking out "Who Will Win the War Between the 5 Biggest Tech Stocks?" In our latest free report, we detail the knock-down, drag-out battle being waged by the five kings of tech, and where Google sits among these five companies. Click here to keep reading.


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  • Report this Comment On August 21, 2013, at 12:50 AM, NathanSmith wrote:

    Google stocks have been doing consistently well, but the last quarter showed a decline in advertising revenue, possibly due to efforts by Bing and Yahoo. I would keep an eye on that and be cautious of investing at this point.

    Another market that has been doing well is gold-backed IRAs (see http://www.goldirarolloversguide.org). They have been performing consistently well for the past five years and have more than quadrupled in value, while still remaining strong. Those are also definitely worth a look.

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