Google Inc. (GOOG:US) shares will beat Apple (AAPL:US) Inc. because the company faces less competition and rising advertising revenue from businesses such as YouTube, BlackRock Inc. (BLK:US)’s Tim Keefe said.
Google’s costs will fall as search and advertising products improve, according to Keefe, a managing director and fund manager for the 30-stock BlackRock Flexible Equity Fund. (BMCAX:US) Google, the owner of the world’s most popular search engine, is the fund’s second-biggest holding (BMCAX:US), according to a March 31 statement from BlackRock. The fund does not hold shares of iPhone maker Apple, he said.
“We own some other things in technology that we think might do better and that is Google,” Keefe said on a radio interview today on “Bloomberg Surveillance” with Tom Keene. Google has “a lot of cash flow and has really high barriers to entry. It can control its own destiny.”
Apple has fallen 19 percent to $430.12 this year amid concern the company is facing slower growth and increased competition from rivals such as Samsung Electronics Co. Google reported this month that first-quarter profit topped analysts’ estimates as advertisers increased spending on mobile and video promotions. Shares of the Mountain View, California-based company have surged 16 percent to $819.06 in 2013.
At least 15 percent of Google’s advertising revenue comes from mobile and the YouTube video-sharing service, up from about 5 percent two years ago, according to Martin Pyykkonen, an analyst at Wedge Partners Corp.
Japan Airlines Co., Warren Buffett’s Berkshire Hathaway Inc. (A:US) and oil refinery Phillips 66 are among the other investments in the Flexible Equity Fund. The fund bought JAL after the nation’s second-largest carrier exited bankruptcy and re-listed its stock in 2012, Keefe said. The shares have jumped 28 percent in 2013, compared with the 8.6 percent advance in the MSCI EAFE Index of stocks in Europe, Israel and Asia.
“We’re trying to find things that have slipped through the cracks,” Keefe said today. “If you think May and June are going to look like April and March and that we’re going to continue in this straight up bull market, your listeners are probably better off in an ETF.”
“But if you think, as I do, that the world continues to be a dangerous place, that there’s still more debt in the system than there was pre-2008, then we want to have the flexibility to go into a lot of different ideas,” he said.
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