4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Alphabet Inc. (NASDAQ:GOOG) is one of the best FAANG stocks to buy now, according to hedge funds. As of April 13, the stock has gained 21.11% year to date.
This April, UBS analyst Lloyd Walmsley raised his price target on Alphabet Inc. (NASDAQ:GOOG) to $123 from $120 and reiterated a Buy rating on the shares.
152 hedge funds disclosed having stakes in Alphabet Inc. (NASDAQ:GOOG) at the end of Q4 2022. The total value of these stakes amounted to $17.6 billion. As of December 31, TCI Fund Management is the largest shareholder in the company and has a stake worth $4.8 billion.
Oakmark Funds made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q1 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG), a global communication services provider based in the U.S., was a top contributor to the Fund’s performance for the quarter. Fourth-quarter earnings for Alphabet came in around consensus expectations in most of its key business areas, and much of management’s discussion on the earnings call revolved around the recent AI developments and costs. CEO Sundar Pichai said Alphabet is an “AI-first company” that is “extremely well-positioned as AI reaches an inflection point.” He expressed excitement about the AI-driven developments the company plans to unveil in search and other areas. Chief Business Officer Philipp Schindler suggested that, just as mobile computing helped drive higher revenue and profits in search, AI should also have a positive impact on financial performance. Notably, CFO Ruth Porat pushed back on the idea that higher computing costs related to AI-driven services would incrementally pressure profitability. Pichai also said the company is “on an important journey to re-engineer our cost structure in a durable way.” Porat did not provide detail in terms of quantifying COMMENTARY Oakmark Global Select Fund: First Calendar Quarter 2023 March 31, 2023 Share: Á à savings. However, she noted that the company is slowing the pace of operating expenditures growth, including a meaningful slowing in the pace of hiring in 2023, with most of the impact expected to become more visible in the financials in 2024. She implied that margins are expected to go up over the next couple of years, mentioning that “revenues will grow faster than expenses.” Total capital expenditures in 2023 are expected to be in line with the 2022 level. In aggregate, management expressed confidence in the business prospects across search, YouTube, cloud and various other key businesses, but Porat observed that “the challenging macroeconomic climate is ongoing.” Overall, we believe the company is positioned well to reap the benefits of the scale of its search business and years of investment into AI capabilities. We also appreciate that the company is transforming its views on cost discipline and efficiency. Our research indicates that Alphabet is trading around its lowest relative price[1]to-earnings ratio on forward consensus earnings since its initial public offering 20 years ago. When we adjust our valuation for losses in its “Other Bets” segment and include an asset value for its cloud segment, we believe the stock trades at an even lower multiple. To us, this is too cheap of a valuation for a company with businesses, like search, YouTube and Android, which have durable competitive advantages and attractive secular growth outlooks.”
