10 Best Advertising Stocks to Buy According to Short Sellers

2. Alphabet Inc. (NASDAQ:GOOG)

Short Interest as % of  Shares Outstanding: 0.33%

Number of Hedge Fund Investors In Q2 2024: 165

Alphabet Inc. (NASDAQ:GOOG) is the world’s largest social media operator and one of the biggest players in the digital advertising industry. Its advertising business allows businesses to place ads on Google’s different platforms, such as its search engine, and on websites that partner up with it. Alphabet Inc. (NASDAQ:GOOG) also allows its advertising customers to customize their campaigns by targeting keyword based searches. While estimates show that the firm commands more than 50% of the search based advertising market, research shows that the general purpose nature of Google’s search engine is hurting it as businesses choose to divert their spending to custom search platforms like Amazon.com, Inc.’s Amazon website. Additionally, Alphabet Inc. (NASDAQ:GOOG) is also facing a lot of regulatory headwinds with reports suggesting that the Justice Department might break it up. Even still, this might not be its biggest problem, as the firm might struggle if OpenAI or another firm offers a superior web search product that uses AI to enhance user experience.

Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter. Here is what the firm said:

“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”