Google Inc (NASDAQ:GOOGL)’s stock is still owned by this experts firm because they believe that search is still a better front to be in when it comes to digital advertising.
In a discussion with Joe Kernen, Rebecca Quick and Andrew Ross Sorkin on CNBC’s Squawk Box, Daniel Ernst from Welch Capital Partners explained why his firm still owns Google Inc (NASDAQ:GOOGL) stock despite the problems the company is facing which ranges from battles against antitrust regulators in Europe, the rise of search inside apps to rivals which are feisty in their struggle against the Internet juggernaut.
“We own it because we still think that search is the better mousetrap in digital advertising. It’s high [return on investment]. They said some really interesting things about mobile search, contextual search and actually being able to reach in and grab information now for the first time from apps which has been a big dilemma for them because people are finding information on apps rather than search so they talked about new tools they have to grab information from apps,” Ernst tells the CNBC hosts.
Furthermore, he explains that Google Inc (NASDAQ:GOOGL) is excited about its video streaming business, YouTube, which may point to better numbers coming out of that business unit in the future.
“They were very excited about YouTube which actually was a drag on prices in the quarter but it’s the 10th anniversary. […] The margins were better than expected and so even with [operational expenditure] growing considerably [and capital expenditure] growing considerably, free cash flow was up 80% year-over-year at about $3.3 billion so that’s a number we like a lot,” Ernst says.
Furthermore, Google Inc (NASDAQ:GOOGL) has an incoming Chief Financial Officer in the person of Ruth Porat, Ernst says, which may point to “increased financial discipline” for the firm and better shareholder returns.
When all of these things are considered, the stock may have an “Apple-like” rise in sentiment in the stock market, he says.
Robert Karr’s Joho Capital owned 150,664 shares of Google Inc (NASDAQ:GOOGL) by the end of 4Q2014.
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