5. Alphabet Inc. (NASDAQ:GOOG)
Third Point’s Stake Value: $452,790,000
Number of Hedge Fund Holders: 165
Loeb initiated a position in Alphabet Inc. (NASDAQ:GOOG) in Q1 2024, acquiring a stake of nearly $453 million. It’s is one of his top growth stocks picks. He likes the company’s dominant position across its different verticals including search and cloud, however, pointed out threats to the company’s core business (Google Search) due to the rise of answer engines like Perplexity and shifting trends in how consumers interact with the internet. But Alphabet Inc. (NASDAQ:GOOG) is a tech titan and Loeb is confident about the company’s ability to protect its profits from competitors by utilizing its expertise in AI, a technology the Google-parent has been working on for over a decade (long before ChatGPT). Here’s are some comments from Third Point’s Q1 2024 investor letter about GOOG:
“During Q1, the funds made a substantial investment in Alphabet Inc. (NASDAQ:GOOG) as the market worried about the impact of LLMs, personal assistants, and answer engines such as Perplexity AI on Google Search. We have owned Alphabet in the past and have long admired its exceptional business model and its proven ability to maintain a leading position across an array of preeminent products such as Search, Gmail, Android, GCP, and YouTube.
The concern that in an AI world, changes in the way consumers will eventually interact with their personal devices and with the internet can result in risks to Alphabet’s core business Search is not entirely unfounded. Alphabet, however, has both a substantial distribution and technology advantage over competitors and is positioned to use its AI capabilities to unify, enhance, and better monetize the entire suite of its products…” (Click here to read the full text)”
Alphabet Inc. (NASDAQ:GOOG) is among the few companies in the AI scene that has the potential to remain untouchable and unrivaled. Why? Let’s talk about this disruptive application that’s made global headlines (ChatGPT) which operates on something called Large Language Models (LLMs). It was Google’s engineers who authored a research paper called Attention Is All You Need back in June 2017 which laid the foundation for the transformer architecture, the architecture that powers all LLMs today. Alphabet Inc. (NASDAQ:GOOG) has a clear economic moat in AI, with its cloud platform (Google Cloud Platform), research lab (DeepMind), and large-scale data collection and processing capabilities. GOOG has the potential to remain an undisputed leader in an industry that’s expected to hit $1.8 trillion by 2030 (as per estimates by Grand View Research).
Apart from that, Alphabet Inc.’s (NASDAQ:GOOG) growth trajectory is remarkable. GOOG’s revenue has grown at a Compound Annual Growth Rate (CAGR) of 18.6% over the past 10 years and its net income has grown even more impressively, at a CAGR of 20.3% during the same period. GOOG is a blue-chip stock with high-teen growth rates that’s currently trading at 23.5 times its forward earnings, lower than its 5-year average multiple of 26x. While there may not be near-term multi-bagger potential to it now, it’s a long-term portfolio pick.
