If I Could Buy Only 1 Stock-Split Stock, This Would Be It

I don't get overly excited about stock splits. Sure, I think they serve a useful purpose. Some investors aren't going to buy a stock if its price is too high. However, buying a stock is investing in a business. Stock splits change nothing about a company's underlying business.

Having said that, I do like several stocks of companies that have conducted stock splits this year. But if I could buy only one stock-split stock, this would be it.

An easy search

There have been several notable stock splits on the calendar in 2022. Some involved stocks that I already own, including Amazon and Brookfield Infrastructure. Others involved stocks that I don't own but think have excellent growth prospects. DexCom and Shopify especially stand out on that list. 

It was an easy search to find my favorite stock-split stock, though. Alphabet (GOOG 9.96%) (GOOGL 10.22%) ranks above all of the others in my view.

Alphabet announced a 20-for-1 stock split on Feb. 1. The split took effect on July 18. Unfortunately, anyone hoping for a huge catalyst from the transaction was disappointed. Alphabet's shares jumped immediately following the stock split but soon gave up those gains.

Some of the other well-known stocks that conducted splits are outperforming Alphabet so far this year. Perhaps they'll continue to do so. However, I still think Alphabet offers a more compelling long-term risk-reward proposition than those other stocks. 

Two unbeatable advantages

I believe stocks that are best positioned to deliver market-beating returns over multiple decades have two unbeatable advantages. First, they have a business moat. Second, they have multiple paths to generate growth (sometimes referred to as optionality). Alphabet has both in spades.

The company's flagship product -- and biggest moneymaker, by far -- is Google Search. Alphabet commands a market share of 92% in the global search engine space, according to Statcounter. Its nearest rival, Microsoft's Bing, claims a market share of only 3.3%. When one of the biggest software companies in the world can't make a bigger dent than that, it's a sign of a strong moat. 

Granted, Alphabet faces greater challenges in other areas. For example, TikTok has emerged as a formidable rival to YouTube. Still, though, YouTube's number of active users is nearly 2.5 times larger than TikTok's. 

Few companies have as many paths to grow as Alphabet does. Its Google Cloud unit is growing especially quickly, with revenue soaring nearly 36% year over year in the second quarter of 2022. Alphabet has plenty of growth opportunities with its other core businesses as well. For example, YouTube is expanding into streaming, a lucrative market.

And you can't leave out Alphabet's famous "other bets." Self-driving car technology business Waymo could generate significant revenue in the not-too-distant future. I'm optimistic about the prospects for Wing's autonomous drone delivery of packages. Alphabet's forays into healthcare with Calico and Verily could also be wild cards that pay off handsomely over the long run.

The price is right

Last, but not least, the price is right with Alphabet. Its shares currently trade at 17.3 times expected earnings with a price/earnings-to-growth (PEG) ratio of 1.3. Those valuation metrics are much more attractive than other prominent stocks conducting stock splits this year.  

Sooner or later, there'll be another strong bull market. When that happens, I predict investors will once again recognize the tremendous growth opportunities and relatively low risk that Alphabet provides. And the number of investors jumping on the bandwagon could be greater than it would have otherwise been thanks to the share price being much more affordable after this year's 20-for-1 stock split.