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Four reasons why Google is attractive Add to ...

Google, despite the continued hype behind its competitor's innovative products and its withdrawal from China, may be attractive and for good reason.

The search engine giant's emergence into the mobile device world through its Nexus One and Android software stack, which includes an operating system, has been a hit. Google recently announced that 60,000 cell phones equipped with Android are shipping on a daily basis.

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Additionally, advertising on the Android continues to increase. According to advertising firm AdMob, U.S. ad impressions on Android devices have increased to 42 per cent in February from 27 per cent in November and worldwide ad impressions have increased by 2 per cent. What makes Google even more appealing on this front, is that it appears to be taking advertising share from Apple's iPhone, which has seen declines of ad impressions to 44 per cent from 55 per cent during the same time frame. Furthermore, Google's mobile phone can be found on Verizon, Sprint, AT&T and T-Mobile's platforms.



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A second factor that is likely to support Google's strength is its upgrade to its online package of word processing and spreadsheet programs, Google Docs. The changes, which were introduced on Monday, include several editing tools for word processing and quicker ways to fill cells in spreadsheets, which will enable it to directly compete with Microsoft Office. The beauty behind Google Docs is that all of its applications are hosted over the Internet, whereas Microsoft's software is typically installed on individual's computers or workspaces.

Another factor likely to bolster Google's attractiveness is the recent talk about developing a tablet device based on its Android operating system software. The New York Times recently reported that Google has been working with numerous hardware makers to construct the perfect tablet device to compete against Apple's iPad and the Amazon Kindle.

Lastly, from a fundamental perspective, Google is highly attractive. The technology giant is trading at 18 times forward earnings, a far cry from the average price-to-earnings ratio of 29 seen in 2008.

From an earnings yield perspective, Google's forward earnings yield is 5.5 per cent, an attractive yield. To further bolster its appeal, the Mountain View, Calif. firm has a hoard of cash on its balance sheet.

A combination of the aforementioned enabled the stock to close at $572.73 on Monday. Some other ways to play Google include the following:

- First Trust Dow Jones Internet Index, which boasts Google as its top holding. FDN closed at $27.51 on Monday.

- iShares Dow Jones US Technology, which allocates nearly 7 per cent of its assets to Google. IYW closed at $59.84 on Monday.

When investing in technology equities it is important to keep in mind the volatility and inherent risks involved. To help mitigate these risks, the use of an exit strategy which identifies price points at which an upward trend could come to an end is important.

According to the latest data at SmartStops.net, an upward trend in Google could come to an end at $553.44. As for FDN and IYW, their price points are $26.38 and $57.69, respectively.

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