We recently published a list of 10 Best Bargain Stocks to Buy in May. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against other best bargain stocks to buy in May.
While increasing tariffs and a hard sell-off have resulted in uncertainty, Neuberger Berman, an investment manager, expects that negotiations can bring some relief to initial tariff proposals. Furthermore, the firm anticipates a sharply slower growth than a US recession. Also, it believes that stimulus in Europe and China can rejuvenate global industrial activity, and the firm recommends styles, sectors, and regions that are most geared to it.
Investment Style- Where Do Opportunities Lie?
Given that a significant amount of tariff shock has now been priced in, Neuberger Berman is constructive on global equities for the remainder of the year. The firm expects that an ongoing recovery in the global industrial economy might be dampened but not derailed. The underlying momentum in the goods economy is expected to support equities that are most levered to it. Furthermore, the firm prefers value over growth (which is relatively expensive) and small caps over large caps. While an overdose of growth-inhibiting policy can impact the relatively healthy economy and push it into recession, the investment management firm believes that the US hasn’t yet reached that point. As per the firm, performance during the decline demonstrates relative strength in some of the more cyclical economic sectors in the US and around the world. The goods-oriented sectors, regions, and styles continue to outperform amidst the recent sell-off.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Lies Ahead?
S&P Global expects inflation to remain closer to 3.0% in 2025 as tariffs raise the prices along the domestic supply chain as well as for the end consumers. For 2026, the firm expects growth to pick up after a slow start. This is because of the abatement of uncertainty associated with the structure of tariffs and the further easing of the policy rate by the Federal Reserve. Also, the growth is expected to be aided partly because of a more favorable growth backdrop in the eurozone, which can help expand US exports.
Neuberger Berman opines that a combination of improving fundamentals and stabilizing risks increased the optimism in the energy sector. As per the firm, increased global industrial activity is expected to continue to buoy oil demand and keep prices aloft. Furthermore, energy seems to be the most undervalued sector in the S&P 500 relative to the current and expected earnings growth. The investment management firm believes that much of the negative news, including regulatory concerns and geopolitical risks, seem to be factored in. This suggests that energy stocks can increase as the sentiment improves.
Our Methodology
To list the 10 Best Bargain Stocks to Buy in May, we used a screener to shortlist the companies that trade at a forward P/E of less than ~20.0x. Next, we chose the ones that analysts see upside to, as of April 11. We also mentioned hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in the ascending order of their hedge fund sentiments.
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)
Forward P/E as of April 11: ~17.6x
Average Upside Potential: ~33.6%
Number of Hedge Fund Holders: 234
Morningstar believes that Alphabet Inc. (NASDAQ:GOOGL) has a wide moat, stemming from its intangible assets, network effect, cost advantage, and customer switching costs. The company’s core advertising business remains deeply entrenched in advertising budgets, enabling the company to reap the benefits arising from a secular increase in digital advertising spending. With enterprises seeking to digitize their workloads, Alphabet Inc. (NASDAQ:GOOGL) possesses significant opportunity in the public cloud space.
Morningstar expects the Google Search business to grow at a mid-to-high single-digit level over the upcoming 5 years. Furthermore, the firm anticipates YouTube to grow at a low double-digit rate in the upcoming 5 years as a healthy advertising business continues to be aided by the growing subscription business. Alphabet Inc. (NASDAQ:GOOGL) has a robust competitive position in the broader tech industry, thanks to its extensive distribution network and advanced AI infrastructure. Furthermore, Alphabet Inc. (NASDAQ:GOOGL)’s future growth remains heavily dependent on its AI initiatives and the successful AI integration throughout its product suite. Also, the expansion of AI capabilities in search, advertising, and cloud services offers numerous revenue growth opportunities.
Cooper Investors, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“Alphabet Inc.’s (NASDAQ:GOOGL) operating performance remains strong with sales growing 14% in the most recent quarter. Highlights included the ongoing secular growth of digital advertising driving Google search (+14%), YouTube’s continued success as a leading content platform (+13%) and the performance of the Cloud business (+29%). In conjunction with this strong sales momentum, Alphabet’s increased focus on expenses is delivering margin expansion such that Operating Income grew 26%.
Despite this operational momentum, Alphabet’s share price declined 11% in the quarter as a federal judge ruled against the company in its case with the US Department of Justice. The case pertains to Google’s monopolisation of both the search and digital advertising markets which is claimed to limit competition and innovation and/or in
Potential remedies include prohibiting exclusive agreements which make Google the default search engine on Apple or Samsung devices, forcing Alphabet to share its advertising technology with rivals, or in the extreme breaking the company apart. The timing and outcomes remain somewhat uncertain however we remain of the belief that at the fundamental level Alphabet’s products are best of breed across several verticals and are benefitting from secular industry trends and that these factors will be the ultimate determinant of long-term shareholder returns.”
Overall, GOOGL ranks 6th on our list of best bargain stocks to buy in May. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.