Top 5 Stock Picks of Value Investor David Abrams

2. Alphabet Inc. (NASDAQ:GOOG) 

Abrams Capital Management’s stake value: $424 million

Percentage of Abrams Capital Management’s portfolio: 9.3%

Number of hedge fund holders: 158

Alphabet Inc. (NASDAQ:GOOG) is one of the largest contributors to Abrams Capital’s performance over the years. Shares of the communication services company gained 217% in the past five years. It is among the internet companies that are gaining momentum in the post-pandemic environment. This is because economic reopening and easing traveling policies are bringing more advertisement revenue for the company.  

In the fourth quarter investor letter, Vulcan Value Partners, an investment management firm, mentioned a few stocks including Alphabet. Here is what Vulcan Value Partners stated: 

“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet, performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following the company and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet (Google) again with a margin of safety.”