Goldman Sachs’ Best Hedge Fund Stock Picks: Top 20 Stocks

4.  Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Investors in Q2 2024: 165

GS’ Number Of Funds: 51

Alphabet Inc. (NASDAQ:GOOG) is the world’s biggest search engine operator – a position that has also enabled it to play a pivotal role in the global advertising industry. The firm’s primary line of business is selling ads to run on its search engine as well as for sites that have partnered up with it. While the scale of these operations provides Alphabet Inc. (NASDAQ:GOOG) with a wide competitive moat, 2024 has been an important year for the firm. Not only has the Justice Department purportedly considered anti trust action against the company for being a monopoly after a court ruling, but the advent of artificial intelligence has created a new industry that could potentially disrupt the decades old internet search engine business model. However, Alphabet Inc. (NASDAQ:GOOG)’s considerable resources, as evidenced by a whopping $111 billion in cash and equivalents means that it can spend all the money that it wants to create new products. Additionally, its DeepMind division is one of the oldest players in the AI industry, and Google Cloud is Apple’s preferred partner for AI training – both of which position it favorably in the AI race.

Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter. Here is what the fund said:

“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”