Silver Beech Capital, a value-oriented investment management firm, released its second quarter 2023 investor letter. A copy of the same can be downloaded here. Year-to-date, the fund returned 14.1% compared to 14.5% for the S&P 500 Index and 4.4% for the Russell 2000 Index. The fund generated strong absolute and relative returns. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Silver Beech Capital highlighted stocks like Alphabet Inc. (NASDAQ:GOOGL) in the second quarter 2023 investor letter. Headquartered in Mountain View, California, Alphabet Inc. (NASDAQ:GOOGL) is a multinational technology company. On July 14, 2023, Alphabet Inc. (NASDAQ:GOOGL) stock closed at $125.42 per share. One-month return of Alphabet Inc. (NASDAQ:GOOGL) was 1.53%, and its shares gained 12.21% of their value over the last 52 weeks. Alphabet Inc. (NASDAQ:GOOGL) has a market capitalization of $1.594 trillion.
Silver Beech Capital made the following comment about Alphabet Inc. (NASDAQ:GOOGL) in its second quarter 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) is a high-quality, asset-light global monopoly business in digital advertising. Google has maintained 90%+ market share in its core search franchise for decades; search dominance drives user engagement across the company’s other market-leading franchises including YouTube, Chrome, Gmail, and Google Cloud, among many others. In the global digital advertising market, Google search and YouTube capture ~50% of total spend. Google’s lead in search is so pronounced that three of the top four search terms on Bing, Google’s “closest” search competitor, are “Google”, “YouTube”, and “Gmail”!
We have long admired Google. Silver Beech invested in the company during the second quarter at an attractive valuation as market concern over the company’s AI strategy eclipsed the reality that Google is a high-quality company with years of growth ahead. In short, we believe that Google is a high-quality company with strong returns on capital and growth prospects, trading at a valuation substantially cheaper than peers, and in fact, cheaper than the broader S&P 500. We believe Google’s intrinsic value is more than 30% greater than its June 30 share price.
In the tables below, we illustrate Google’s high quality by calculating its after-tax returns on capital (ROC). When evaluating business quality, we think of a business like a capital machine: you put capital in (as capital investment) and get capital out (as cash flow). ROC captures this idea. Generally speaking, the higher a company’s ROC, the higher its quality. We think Google’s true ROC requires a few adjustments because the company funds unprofitable business lines that are secondary to its core franchise and excessive employee compensation that has been widely criticized and even noted by management…” (Click here to read the full text)
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Alphabet Inc. (NASDAQ:GOOGL) is in third position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 204 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOGL) at the end of first quarter which was 209 in the previous quarter.
We discussed Alphabet Inc. (NASDAQ:GOOGL) in another article and shared Madison Investors Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
