Could Alphabet stock be my smartest buy this year?

I have a list of stocks that I would like to buy for my portfolio if the price reaches a point that is attractive enough. Names that have been on the list for a long time are Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). As the owner of digital properties including Google and YouTube, I see the company as a financial powerhouse. The stock price has dropped and is nearing the point where I would consider adding it to my portfolio. I think buying Alphabet stock at the right price might be the smartest investment decision of the year. Here is the reason.

Make money in the stock market

Ultimately the stock market is exactly what it sounds like. It is a market, where sellers and buyers make a deal to transfer shares between each other at an agreed price.

As a long-term investor, then, to make money to have shares I try to find a big business selling below what I think is the same price. After holding it for a few years, I may be able to sell it at a higher price if the business has been doing as expected.

That attracted me to Alphabet. It has a unique set of businesses that competitors will struggle to copy directly. It has a massive customer base. On top of that, it is hugely profitable. Unlike some of its digital rivals, Alphabet is a large-scale global business with a proven business model and enormous profitability.

Falling stock prices

Even so, Alphabet shares have fallen 32% over the past year.

That fall illustrates some of the risks the company faces. There is a lot of competition from digital upstarts like TikTok. That could lead to profits and profits at Alphabet. As a company with a big ad business, parent Google could also see profits drop sharply as advertisers tighten their belts in the recession. In the last quarter, net income decreased by 26% compared to the same period of the previous year. Revenue growth of 6% annually, by Alphabet’s standards.

If income continues to fall – with the risk that revenue growth may also go into reverse as advertising expenditures fall – I think Alphabet’s price could slide further.

Quality on sale

At what price should I consider buying Alphabet stock for my portfolio?

Actually, I have thought the price is quite attractive, with a price-to-earnings ratio in the high teens. But earnings could fall, meaning the prospective ratio is less attractive.

However, from a long-term perspective, Alphabet has what I see as a compelling investment case. It enjoys the sort of moat billionaire business Warren Buffett talks about, meaning it enjoys a strong competitive advantage in its market.

A decade from now, I wouldn’t be surprised if the stock is worth far more than it is today. Over the past decade, it has grown by more than 500%. It is not a guide to future performance. But I think adding it to the portfolio at current prices could be a profitable move over the years. Due to their attractive business model, buying these stocks is probably the best move of the year. If I had money to invest, I would do it.