Google Inc. (NASDAQ:GOOG) paints itself as an innovative firm serving the needs of humanity. The reality is that the firm is a powerful duopolist with a 66.7% market share with its powerful search engine. Its biggest competitor, Microsoft’s Bing losses money and it is hard to tell when Microsoft will break even with Bing.
Google Inc. (NASDAQ:GOOG) continues to invest in new products like the Google Glass. If it can meld software with proprietary hardware then it will be closer to becoming a vertically integrated monopolist, a most profitable proposition.
Similar to Exxon Mobil Corporation (NYSE:XOM), Google has a total debt to equity ratio under 0.1. Without using debt it has been able to achieve a return on investment of 14.4% and a strong profit margin of 21.4%. High margins and strong growth have helped to drive up Google’s price to earnings ratio to 25.8. The firm is a tad expensive, but it continues to grow and it is a strong long term investment.
Wal-Mart Stores, Inc. (NYSE:WMT) has made a name for itself as a stable investment. The broad market has experienced a number of bubbles since 1999 and Wal-Mart Stores, Inc. (NYSE:WMT) has managed to stay out of the froth. The company has a huge amount of power given its status as one of the top retailers in the world.
The future isn’t all roses and daffodils. The firm’s model of sourcing cheap goods from overseas producers will be hampered by the decline of cheap oil. Also, its focus on the lower end of the market is negatively impacted by low U.S. wage growth.
With a total debt to equity ratio of 0.78 this firm has significantly more debt than any of the other companies mentioned. Its return on investment of 14.9% and profit margin of 3.8% show that it is very profitable. Wal-Mart Stores, Inc. (NYSE:WMT) will not disappear anytime soon and it is a strong stable investment given its prominent position as a worldwide retailer. Still, it does not offer the growth opportunities of Google.
Conclusion
Google Inc. (NASDAQ:GOOG) and Exxon Mobil Corporation (NYSE:XOM) are two strong investments that should be able to weather an increase in interest rates. These companies are not dependent upon cheap loans and have a history of profitability in their industries. Wal-Mart Stores, Inc. (NYSE:WMT) is another strong player, but the low growth in U.S. wages and impact of high oil prices decreases its attractiveness.
The article Low Interest Rates Are Dangerous: Stick with Dependable Firms originally appeared on Fool.com and is written by Joshua Bondy.
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