10 Best Stocks to Buy and Hold For 3 Years

3. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Funds: 202

Alphabet Inc. (NASDAQ:GOOGL) ranks 3rd on our list of best stocks to buy and hold for 3 years. It is a multinational technology conglomerate and the parent company of Google, YouTube, and several other subsidiaries, including Waymo, which focuses on self-driving technology. The company has also developed a family of large language models (LLMs) known as Gemini. These models are integral to the Gemini chatbot and enhance various AI features within Google Search.

While Alphabet Inc. (NASDAQ:GOOGL) already holds a 90% market share globally with regards to the search engine market, to further enhance the internet search experience management has launched AI Overviews. This feature provides AI-generated responses at the top of search results, integrating text, images, and links to streamline user access to information. It is currently rolling out in 100 countries and aims to serve over 1 billion users monthly.

During the fiscal third quarter of 2024, the company generated $88.3 billion in revenue up 15% year-over-year. Google Advertisement accounted for more than 74% of this revenue standing at $65.9 billion. With the introduction of AI Overviews and other features, management is looking to enhance monetization strategies in response to investor expectations for returns on substantial AI investments. CEO Sundar Pichai highlighted they have reduced the cost per query for its AI Overviews by over 90% within 18 months while doubling the size of its custom Gemini model.

Qualivian Investment Partners stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter:

“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.

Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”