Many new investors or those curious about investing get intimidated by the plethora of investment choices, a glut of information, or the belief that they don't have enough money to start.
This couldn't be further from the truth.
Whether you have a few thousand or just a couple hundred dollars handy, plenty of high-quality stocks are available.
The most important thing is to get moving. You can add to your accounts from there with a monthly designation, or just when you have extra cash available. (Consider putting that Christmas money to good use.)
Another misconception is that you should wait for the market to turn around before investing. After all, what if it continues to drop? The truth is that no one can accurately and consistently time the market -- even professionals. Stocks should be purchased with an emphasis on quality companies to be held for several years. And market downturns are the best time to buy.
Let's look at Google parent Alphabet (GOOG 2.62%)(GOOGL 2.98%), which is a compelling long-term opportunity trading for just under $100 per share.
A coveted ad business with a massive cloud opportunity
2022 has been a tough year for Big Tech stocks like Alphabet, which is down more than 30%. Economic uncertainty and a recession prospects have weighed down shares, but this short-term pain can mean long-term gains.
Alphabet stock is under pressure because investors are concerned advertisers will be cutting budgets next year during a potential recession. This could weigh on profits in the short term; however, Google Advertising segment sales, which include Google Search, YouTube ads, and Google Network, rose 12% through the thid quarter t o reach $165.4 billion.
Companies and advertisers compete heavily to be on page one of Google Search, which gives Alphabet long-term pricing power. Search advertising is coveted because consumers are often ready to buy when they search.
For instance, a home appliance retailer advertising on TV is reaching a ton of people who aren't in the market. But someone searching for a "quiet dishwasher" is probably looking to purchase one. This should continue to power results and lead to long-term profits for shareholders.
The company also has a burgeoning cloud business that produced $24.5 billion in sales on 40% growth over the trailing 12 months from Q3. Sales have grown prolifically for several years, nearly tripling since 2019, as shown below.
Data source: Alphabet. Chart by author.
Google Cloud currently ranks third, behind Microsoft Azure and Amazon Web Services, in the $217 billion cloud infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) market, according to Statista. Google Cloud isn't profitable yet. If management can successfully scale it, it could be a massive boon in the coming years.
The stock looks undervalued
Alphabet is undervalued historically on several measures, with two shown below.
GOOG PE Ratio data by YCharts
The stock is about 50% off its average price-to-earnings and price-to-free-cash-flow ratios, suggesting that investors with long-term timelines are getting tremendous value now.
Successful investing isn't about timing the market or making a fast buck. Remember, time in the market beats timing the market for long-term goals. Fruitful investing means getting started, adding money periodically, and investing in excellent companies. Alphabet could be a great place to begin.
