We recently compiled a list of the Top 10 Stocks to Buy According to Eagle Capital Management. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other stocks.
Eagle Capital Management, a New York-based hedge fund, was founded in 1988 by Beth and Ravenel Curry. Their son, Ravenel Boykin Curry IV, joined the firm around the early 2000s after managing a portfolio at Kingdon Capital and is currently a key partner. A Yale University graduate with an Economics degree and an MBA from Harvard Business School, he plays a pivotal role in the firm’s strategy. Historically, Eagle has outperformed major benchmarks, including the broader market and the Russell Value Index. Over five years, Eagle delivered a 5.7% return versus the market’s 2.4%, and since its inception, it has generated a cumulative return of 2,031%, significantly surpassing both indices.
Eagle Capital Management adheres to a disciplined investment philosophy centered on identifying undervalued companies with unrecognized long-term growth potential. The firm employs a fundamental, bottom-up research approach, focusing on the key drivers of long-term value creation. By maintaining an extended investment horizon, Eagle Capital is able to take a distinctive perspective on industry and company trends. The firm’s investment strategy prioritizes businesses with two essential characteristics: strong underlying assets capable of generating cash flow and sustaining value even in challenging market conditions, and transformative changes within the company that remain unrecognized by the broader market yet are likely to drive future growth. This approach aims to provide downside protection during market downturns while positioning the portfolio for enhanced returns as these changes materialize. These core principles have been integral to Eagle Capital’s strategy since its founding, forming the foundation of its competitive advantage and contributing to its consistent market outperformance since 1988.
Moreover, Eagle Capital Management follows a value-oriented investment strategy with a long-term perspective, assessing price in relation to intrinsic value rather than relying solely on traditional valuation metrics like price-to-earnings or price-to-book ratios. The firm’s investment team focuses on long-term prospects, particularly beyond five years, analyzing business growth, industry dynamics, and margin potential while identifying opportunities that the broader market may overlook. A key component of Eagle’s strategy is maintaining a “Margin of Safety,” achieved through valuation discounts, business resilience, growth potential, and strong, experienced leadership.
The firm concentrates its portfolio on high-conviction investments, typically holding 25-35 stocks. As of Q4 2024, it holds over $27.4 billion in 13F securities, and its top ten positions account for 57.62% of its portfolio. This approach allows Eagle to focus on asymmetric risk opportunities, ensuring that its top positions offer significant upside potential while maintaining strong downside protection. Adopting a private equity-style approach to public equity investing, Eagle builds positions in high-quality businesses with sustainable returns and durability. A rigorous due diligence process precedes any investment decision, and the firm leverages direct access to senior management at portfolio companies to gain deeper insights into long-term strategies, enabling decisive action when the right opportunities emerge. Since its inception, Eagle has consistently applied the same investment philosophy, aiming to generate superior returns through rigorous valuation analysis and a long-term perspective. The firm’s long-term investment horizon allows it to take a differentiated approach to market trends, focusing on businesses undervalued relative to their intrinsic earnings power.
Our Methodology
The stocks discussed below were picked from Eagle Capital Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,008 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders as of Q4: 234
Eagle Capital Management’s Equity Stake: $1.54 Billion
Alphabet Inc. (NASDAQ:GOOGL) posted strong fourth-quarter earnings, reporting $2.15 per share on revenue of $96.47 billion, slightly exceeding analyst expectations of $2.13 per share. This marked a significant improvement from the previous year’s Q4 earnings of $1.64 per share on $86.3 billion in revenue. CFO Anat Ashkenazi noted that a substantial portion of Alphabet’s investments has gone into technical infrastructure, primarily servers and data centers. CEO Sundar Pichai reaffirmed the company’s commitment to innovation, announcing plans for approximately $75 billion in capital expenditures for 2025, with a continued focus on generative AI.
In the race for artificial intelligence dominance, Alphabet Inc. (NASDAQ:GOOGL) stands out, viewing AI as a “once-in-a-generation opportunity” to strengthen its position in key markets, particularly cloud computing. Google Cloud saw its revenue surge 30% in Q4 2024 to $11.9 billion, highlighting its growth potential. Despite recent stock fluctuations, dropping below $170 per share, investor optimism remains high, with a median price target of $220, suggesting a projected 30% increase by year-end. Alphabet’s deep institutional expertise in AI could further propel its cloud business, positioning it as a formidable competitor in the evolving tech landscape.
Beyond financial performance, Alphabet Inc. (NASDAQ:GOOGL) faces increasing competition in AI and search, areas where it has traditionally been dominant. While Google Search remains the industry leader, AI-powered chatbots, such as OpenAI’s ChatGPT and Meta AI, have challenged its position. DeepSeek’s AI model also directly competes with Google’s Gemini, which saw an upgrade in December with the release of Gemini 2.0 Flash, offering faster response times. Addressing competition, Pichai acknowledged DeepSeek’s capabilities but emphasized that Google’s AI models remain among the most efficient in the industry, standing strong against rivals like DeepSeek’s V3 and R1. As Alphabet Inc. (NASDAQ:GOOGL) continues investing heavily in AI, its ability to maintain leadership in search and cloud computing will be crucial for sustaining long-term growth.
Overall GOOGL ranks 4th on our list of the stocks to buy according to Eagle Capital Management. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.