Google Vs. Apple, From A Fund Manager Who Owns Both

As technology stocks that carry three-digit price tags, Google Google and Apple Apple are part of a fairly exclusive fraternity. This summer, after the former missed quarterly earnings expectations and the latter beat the Street’s estimate, some wondered if Google’s run of outperforming Apple could finally start to reverse.

In a recent conversation with a mutual fund manager who owns both I asked that very question. His response: the trend may shift, but both companies are still long-term buys.

Greg Adams has a dividend focus in the Alger Growth Income Fund, but he doesn’t necessarily get hung up on whether a company is actually paying one.

While the vast majority of his holdings are paying shareholders  every quarter, he also finds room in the portfolio for a stock like Google. Adams is willing to sacrifice current income for a company with a stellar growth rate and a massive cash hoard that will allow it to pay a dividend at the drop of a hat should the board so decide.

There are few better examples than Apple, which only began paying a dividend in 2012, but which Adams held for some time before that on the assumption that the company’s impressive cash generation would ultimately lend itself to some form of capital distribution.

On the Apple front, Adams said the quarter was a positive, but only insofar as it exceeded low expectations. “The next key is new products, especially a low-end phone and a refresh on the high end,” he said. With something of a floor put in around the $400 level by the company’s massive capital plan – it upped its buyback authorization and dividend payout in April – it’s something of a wait-and-see game for the next few months. “It feels like we’re turning the corner, but it’s still a slog until we get new products,” Adams said.

Google, meanwhile, saw its march toward $1,000 a share hit a snag in July when its second-quarter results came up well short of expectations.

Adams was sanguine about those results though. “The quarter was a little disappointing, [but it came] on the heels of upgraded expectations,” he said, calling Google a story of “continued cash generation,” even as the company works through headwinds in the mobile ad business. “We think expectations on Google got ahead of themselves,” he said, “it’s still headed in the right direction.”

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