2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Investors: 216
On the 20th anniversary of Alphabet Inc. (NASDAQ:GOOG)’s IPO, Jim Cramer reflected on the company’s remarkable journey. Cramer had estimated Alphabet Inc. (NASDAQ:GOOG)’s value at around $300 on its first day, a figure so high that it prompted questions from his lawyer. In hindsight, he admitted that $500 would have been a more accurate estimate, though he was being conservative.
“On this the 20th anniversary of the IPO, I want you to consider the saga of Google. I like the saga so much; it makes me happy. When it went public, it used a Dutch auction system which favored buyers over sellers. You got a driven price if you managed to snag a piece of it. I remember mentioning on air that I thought Google was worth about $300 that day, a price so high that our lawyer called me to ask how I came up with that number. I said I would have used $500 but was being conservative.”
Since its IPO, Alphabet Inc. (NASDAQ:GOOG) has continually reinvented itself, growing its cloud business significantly under Thomas Kurian, who took over in 2019. Cramer praised Kurian’s achievements, noting that Google Cloud is now on a $42 billion run rate. He also highlighted recent executive changes, including the appointment of a new CFO, which he views positively. Cramer noted that while Alphabet Inc. (NASDAQ:GOOG) has been a tremendous performer—delivering a 7,736% return since its IPO—investors often struggle with short-term market fluctuations.
He compared this situation to recent market movements, such as NVIDIA Corporation (NASDAQ:NVDA)’s strong performance despite broader market concerns. Cramer emphasized that individual stocks, rather than indices like the S&P 500, are the real drivers of wealth creation. He also advised maintaining positions in top-performing companies like NVIDIA Corporation (NASDAQ:NVDA) and Amazon.com, Inc. (NASDAQ:AMZN), despite short-term market volatility.
Artisan Select Equity Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“The top contributors to performance for the quarter were Alphabet Inc. (NASDAQ:GOOG), Lam Research and Elevance. Alphabet shares rose by 21% during the quarter, making it the largest contributor to our performance. The company reported excellent Q1 earnings, highlighting accelerating revenue growth, strong profitability and effective capital allocation. Alphabet’s core search business is growing at a mid-teens rate—the fastest growth rate in nearly two years. Importantly, its non-search businesses have reached significant scale, with its cloud and YouTube businesses expected to reach a combined run-rate of $100 billion by the end of 2024
During the quarter, Alphabet also displayed meaningful progress in its AI initiatives, and we believe it is well positioned to be a leader in this field. The capital allocation is solid. It is returning all the free cash flow to shareholders and announced that it will start paying a dividend. Alphabet’s shares are trading at just over 20X next year’s earnings, which is a very reasonable valuation for a business with such high-quality characteristics and growth potential.”
