We recently published a list entitled Billionaire Israel Englander’s Top 10 Stock Picks for 2024. Since Alphabet Inc. (NASDAQ:GOOG) ranks 8th in the list, it deserves a deeper look.
Billionaire Israel Englander is one of the most notable hedge fund managers in America. He founded Millennium Management back in 1989. Today, the fund’s portfolio is worth over $234 billion. Englander nabbed the top spot in Bloomberg’s list of highest-earning hedge fund managers in 2023, with a whopping $2.8 billion in net earnings including gains from personal investments and fees. Earlier this year, Bloomberg reported that Izzy Englander’s Millennium Management earned $600 million from commodities investments last year. However, in a separate report, the publication said despite installing a new chief of its commodities and making big changes, Millennium’s commodities business is lagging behind Citadel (of billionaire Ken Griffin) which made a whopping $8 billion from commodities in 2022. Bloomberg said, citing sources, that part of the reason why Millennium is struggling to post big gains is billionaire Englander’s imposition of “tight guardrails” to limit losses. To make money in the commodities business, experts say, you have to take risks and give some freedom to traders. But Englander likes to be in control. A Financial Times report earlier this year said Millennium Management manages a whopping $60 billion in assets, employs 5,400 people and has 17 offices. Yet Englander owns 100% of the firm.
The report said, citing a person who works at the fund, that this major concentration is “not a good idea.”
The FT report said Englander’s fund was up 8.3% in 2023 through October, while it returned 12.5% in 2022, 13.6% in 2021 and an impressive 25.9% in 2020.
For this article, we scanned Millennium Management’s Q1 portfolio and picked the fund’s top 10 holdings. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Israel Englander of Millennium Management
Alphabet Inc. (NASDAQ:GOOG)
Billionaire Israel Englander’s Stake Value: $820,337,453
Alphabet Inc. (NASDAQ:GOOG) is apparently in a no-holds-barred fight against competitors in the AI race that according to many threatened the bread and butter of Google its search business. However, many analysts believe Alphabet Inc. (NASDAQ:GOOG) is making a big turn and will continue to grow. Alex Kantrowitz, Big Technology founder, while talking to CNBC last month, said that the present for Alphabet Inc. (NASDAQ:GOOG) is looking “real good” amid revenue growth, leadership’s harsh stance against those “making trouble” insider the company, dividends and buybacks.
Latest data analyzed by Bank of America shows that across all devices, Alphabet Inc.’s (NASDAQ:GOOG) market search in search actually gained half a percentage point in May on a MoM basis. BofA analyst Justin Post said this shows Alphabet Inc.’s (NASDAQ:GOOG) AI Overviews are “aiding query growth and usage.”
Analysts also believe Alphabet Inc. (NASDAQ:GOOG) is in a strong position to offset any headwinds or lost market share in Google search with YouTube, which saw its ads revenue reach $8.1 billion in the first quarter, a 21% growth. Alphabet Inc.’s (NASDAQ:GOOG) net income in the period came in at $23.66 billion, up 57%, or $1.89 per share.
Alphabet Inc. (NASDAQ:GOOG) bulls believe the market is not incorporating the company’s growth in Cloud, Other Bets, Video and other high growth initiatives. The stock is trading 20x Alphabet’s 2025 EPS estimate of $8.57. This multiple makes the stock look attractively valued since the Wall Street expects Alphabet Inc. (NASDAQ:GOOG) earnings to grow by 13.40% in 2025 and by 19% over the past five years on a per annum basis.
Lakehouse Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its April 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) delivered a strong quarterly result that came in well ahead of analysts’ expectations. Revenue grew 15.4% (16.0% constant currency) to $80.5 billion and operating income grew 46.0% to $25.5 billion. Revenue growth accelerated across Search, YouTube Ads, and Google Cloud, all whilst the company delivered its highest operating margin since 2021 – showing meaningful progress in the company’s efforts to durably re-work their cost structure. On the Generative AI front, management emphasised the company’s infrastructure advantages including 5th generation TPUs(chips developed by Google specifically for AI training and inference), high performance data centre architecture, and AI models that are 100x more efficient versus 18 months ago. Overall, we believe that Alphabet is well placed for the AI opportunity ahead and still has significant latent earnings power. When combined with a relatively undemanding valuation of 21x forward net profit and over $100 billion of cash on the balance sheet, it’s not hard to see why we remain positive on the range of outcomes in the years ahead.”
Overall, Alphabet Inc. (NASDAQ:GOOG) ranks 8th on Insider Monkey’s list of Billionaire Israel Englander’s Top 10 Stock Picks for 2024. You can visit Billionaire Israel Englander’s Top 10 Stock Picks for 2024 to see other stocks in the list. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Alphabet Inc. (NASDAQ:GOOG) 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.