I hear you on the relative performance, but if it was beating the S&P 500, we probably wouldn't be discussing it on the falling knives board. :-)

Fair enough!


Far more important to me is the story. If I stop believing in the company, then I'm out. My thoughts are that they are arrogant and bloated

Perhaps so. But they are so obscenely profitable they can get away with that. In the ad biz, they aren't the competition, they're the market.

I used to do some work for Bristol Myers Squibb, and they were horribly bloated: bureaucratic and inefficient. But it was a business with so much money flowing through it that it just didn't matter much. Great art collection, too. I don't know about Alphabet's art, but maybe the bloat-wth-cash has parallels.

I have always assumed Alphabet they will blow (say) 15% of their earnings on things that never have a return. Meh, that's life. The other 85% is still formidable. If I wrote you a cheque for $100bn, could you set up as a viable competitor to undercut them and steal a meaningful cut of their business? Nope.

It's never conventionally cheap, but I have little doubt that their earnings per share will be higher in 5 years, and higher still in 10. The bulletproofness counts for a lot to me.

Historically one could do particularly well with entries at under 6 times sales, but that target multiple should be expected to come down slowly over time. So I don't see it as unusually compelling at the moment, just in the broad zone of (for them) normality.

Last 10 years:
Revenue/share up 20.5%/year
Cash flow per share up 20%/year
Earnings per share up 19.5%/year
All of those figures are higher if you look only at the last five years. And I don't foresee the growth grinding to a halt any time soon.
Consequently these conventionally rich valuation levels seems almost sane to me (and I'm a cheapo), given the relative predictability. The reverse of Nvidia, who is doing outrageously well but nobody knows what their business will really look like in 5 or 10 years.

Jim