Alphabet, the parent company of Google, has always be one of my favourite and high conviction stocks. It was also one of my top performing stocks in 2021.
The company has excellent fundamentals, huge cash reserves, has been growing profits quarter after quarter, is absolute dominant in the search engine space (with number 1 being google search and number 2 being YouTube).
The share price has risen more than 100% from the March 2020 low of $1,110 to current day high of $2,689. Alphabet has also announced its stock 20-for-1 split in Q4 2021 earning report. The stock split will happen in July 2022.
Is Alphabet Overvalued or Undervalued?
So, after Alphabet’s share price has doubled in the last 2 years, is it still trading at a reasonable price? Or is it overvalued now? I would like to share the 2-min video extract by value investor Adam Khoo where he analysed and worked out the intrinsic value of Alphabet stock.
The intrinsic value of Alphabet (as of Feb 2022), accordingly to Adam Khoo, works out to be $3757. At Friday (25 Feb 2022) closing price of $2,689, Alphabet is still 28.4% undervalued.
What is my plan moving forward?
As the market continues to stay volatile, Alphabet’s price may fall below the current price. I intend to buy 5 share of Alphabet, progressively over the next few months, whenever there is a huge dip in the market.
These 5 shares will be part of my long term investment as I believe Alphabet still has plenty of upside potential. When July 2022 comes, these 5 shares will become 100 shares due to the stock split. By then, Alphabet’s price may rise due to the stock split as more retail investors come in to buy the shares at a cheaper price (per unit).
I will then sell covered call on my 100 shares of Alphabet to earn a sideline income and to further reduce my average price on Alphabet. If the shares and options contracts do not get called away, it will be having the best of both worlds of both long-term investing and earning a sideline come through options trading.
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