5 Best High Margin Growth Stocks to Buy Now

3. Alphabet Inc. (NASDAQ:GOOG)

Operating Margin: 29.65%

Number of Hedge Fund Holders: 153

On July 26, Alphabet Inc. (NASDAQ:GOOG) reported fiscal Q2 earnings per share of $1.21, while it generated revenue of $69.7 billion, up 12.61% year-over-year. As of August 24, the company has a trailing twelve-month operating margin of 29.65% and free cash flow of $65.18 billion.

On July 27, Wells Fargo analyst Brian Fitzgerald revised his price target on Alphabet Inc. (NASDAQ:GOOG) to $160 from $170 and reiterated an ‘Overweight’ rating on the shares. The analyst noted that Google Search and Cloud are the two key drivers of the company’s core long-term growth and profitability.

At the end of Q2, 153 hedge funds were long Alphabet Inc. (NASDAQ:GOOG)’s class C shares, with stakes worth $22.3 billion. 191 funds were also long its class A shares, with a collective stake valued at $22.1 billion. As of June 30, TCI Fund Management owns roughly 2.47 million shares of Alphabet Inc. (NASDAQ:GOOG)’s class C shares, worth $5.41 billion. The investment covers 17.13% of TCI Fund Management’s 13F portfolio.

Here is what Wedgewood Partners had to say about Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2022 investor letter:

“Alphabet grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”