The broad market's weakness since early this year has been rather indiscriminate. That is to say, whether they deserved it or not, most stocks have been dragged lower.
With the dust of this meltdown finally starting to settle, though, many investors are beginning to realize they were too quick to dump some of their stocks. A few bold investors are even starting to tiptoe back into the very stocks they shed. More buyers may be waiting in the wings to do the exact same thing, pushing those stocks' prices back to their previous highs.
If you're looking to do the same, it's better to get in now rather than wait for those buyers to really reinflate those prices. And of all the stocks I already own that I'm buying more of before a rebound takes full hold, Alphabet (GOOG 1.46%) (GOOGL 1.50%) is at the top of my list.
Unshakeable
In most regards it's a perfect business.
Alphabet's flagship operation, the search engine Google, fields 92% of the world's web searches, according to data from Global Stats' statcounter, generating $43.3 billion worth of ad revenue last year for serving as the planet's preferred digital middleman. That's roughly 58% of the company's total top line. YouTube accounts for another 11% of the company's sales, driving $8.6 billion worth of business for it in 2021, and sites that are part of the Google network tacked on another $9.3 billion to last year's total top line of $75.3 billion. Yet most users of any of its platforms don't give the ads they're seeing (and occasionally clicking) a second thought. The word "Google" itself has even evolved from a name into a verb.
That's powerful.
Image source: Getty Images.
It also seems unlikely any of the dominance Alphabet enjoys is going to fade anytime soon.
As consumers increasingly embrace the mobile web, they're still relying on Alphabet to help make that happen. Its Android operating system powers 70% of the world's mobile devices, according to Global Stats' statcounter, steering those people toward Google's online ecosystem. YouTube is also the world's most-used on-demand video platform, drawing in more than 2 billion users every month, and serving up more than a billion hours' worth of content every day. Even at only a few pennies per click, Alphabet is a juggernaut that no rival or cultural trend is going to stop.
Underscoring this argument is the fact that only twice in the past 10 years has the company suffered a quarterly year-over-year decline in operating profits, or revenue, and one of those times is the quarter the COVID-19 pandemic began to spread across North America.
However, it seems many investors have forgotten about Alphabet's dominance and persistent growth this year.
Sweating the small stuff
The doubt is understandable, to a degree.
Between rampant inflation and a resurgence of the coronavirus, the future was murky around the beginning of the year. Then, before stocks had a chance to stage a recovery, Russia invaded Ukraine. That conflict threatens to spread outside of Ukraine's borders, in turn threatening the global economy. That's a key reason Alphabet shares are down 12% year to date, and more than 16% below their Feb. 2 high.
Investors willing to take a step back and look at the bigger picture, though, may see that none of these risks really threaten Alphabet's core business. Indeed, economic hardship may even prove helpful to Alphabet's operations. How so? Consumers might skip a vacation, but they're not going to turn in their mobile phones. Someone may cancel a streaming service or two if money gets tight, which means they're even more apt to tune into free, ad-supported YouTube to get their entertainment fix.
And if the world somehow escapes economic hardship and rekindles its post-pandemic recovery, companies will be willing and able to advertise in an effort to continue driving their own growth.
Their mistake is your opportunity
It's a nuance about Alphabet that most investors ultimately understand. It's just that, sometimes, it's easy to get swept up by headlines and forget that news is just short-term noise. The past few months have been one of those times.
More important to interested investors right now, though, is that the market as a whole is likely to remember this reality regarding Alphabet. Bolstering the bullish case is the fact that the current pullback is the stock's biggest tumble since February and March 2020, when the market was cratering due to fears of the pandemic's spread. That plunge ended up being an incredible long-term buying opportunity, too.
As always, the bigger picture is all that really matters.
