5 High Growth Value Stocks to Buy According to Seth Klarman

3. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 156

Baupost Group’s Stake Value: $354,412,000

3-year Revenue Growth: 59.1%

Securities filings for the fourth quarter of 2022 indicate that Seth Klarman’s Baupost Group owns nearly 4 million shares of Alphabet Inc. (NASDAQ:GOOG), worth $354.4 million and representing 5.78% of the total portfolio. Klarman increased his position in Alphabet Inc. (NASDAQ:GOOG) by 191% in Q4. With average 3-year revenue growth of 59%, Alphabet is one of the top high growth stocks owned by Klarman. 

Morgan Stanley analyst Brian Nowak said on February 9 that recent presentations from Alphabet Inc. (NASDAQ:GOOG) and Microsoft on artificial intelligence indicate significant changes in the search user experience, overall utility, and higher incremental search compute costs. While Nowak believes that Alphabet Inc. (NASDAQ:GOOG) has the technology and scale to sustain and expand its “leading user base,” the deeper integration of AI may result in greater incremental cost risks. The firm estimates that every 10% of Google Search queries moving to language models could add about $1.2 billion in operating expenses. Despite this concern, Morgan Stanley maintained an Overweight rating and $135 price target on Alphabet Inc. (NASDAQ:GOOG) shares.

According to Insider Monkey’s third quarter database, 156 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 153 funds in the preceding quarter. 

Diamond Hill Large Cap Strategy made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:

“Other bottom contributors included media and technology giant Alphabet Inc. (NASDAQ:GOOG), apparel and footwear company V.F. Corporation and utility operator Dominion Energy. We believe Alphabet’s shares underperformed on concerns of a weakening macroeconomic environment. The company also reported weaker-than-expected earnings and revenue for Q3 2022. Longer-term, we expect Alphabet’s search engine advertising, YouTube advertising and other initiatives to continue driving revenue growth. As such, we used the share price weakness this quarter to add to our position.”