10 Best Magic Formula Stocks For The Rest Of 2024

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Investors In Q2 2024: 216

Gotham Asset Management’s Q2 2024 Stake: $68.7 million

Alphabet Inc. (NASDAQ:GOOGL) is the mega cap technology firm that primarily earns revenue through its search engine, Google Search. Additionally, the firm also has a key presence in lucrative industries such as video streaming and cloud computing. However, Alphabet Inc. (NASDAQ:GOOGL)’s business is still heavily dependent on Search. During Q2, $42.6 billion of Alphabet Inc. (NASDAQ:GOOGL)’s $72.6 billion in revenue came from Search. This sizeable business allows the firm to command more than 50% of the search advertising market, and it provides Alphabet Inc. (NASDAQ:GOOGL) significant leverage with publishers and advertisement companies to divert their transactions through its platform. Additionally, it also has a foundational AI model in the form of Google Bard, which places it at the forefront of AI developments. However, despite its moat, Alphabet Inc. (NASDAQ:GOOGL) faces challenges such as purported Justice Department plans to break it up and a growing preference among advertisers to choose focused platforms such as eCommerce websites.

Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter. Here is what the fund 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.”