We recently compiled a list of the 10 Best Holding Company Stocks To Buy Now. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other holding company stocks.
“The Market is Anticipating Too Much”
Some may think the Fed meeting on the 18th of September may have put an end to the basis point cut debate, however, while the Fed did initiate a rate cut by half a percentage, two Fed meetings are remaining before the end of 2024. To discuss the likely rate cut path, Chris Versace, Tematica Research CIO, appeared in an interview on Yahoo Finance on September 24.
Versace suggests that it is quite impossible to predict the path the Fed is to adopt before 2024 ends and the decision will likely be more reliant on data. The labor market weakened for the second consecutive month and, according to him, the Fed will probably go for another 50 basis point cut, if not more.
He urges investors and traders to triangulate all data points to make decisions including economic data, inflation data, and the speed at which the economy is growing. Versace states that the market right now is stretched and that there is more to the bigger picture such as the upcoming elections, earnings growth, and the Fed’s decisions.
“Volatility Should Remain Elevated”
On September 25, Burns McKinney, NFJ Investment Group Managing Director & Senior Portfolio Manager, appeared in an interview on Yahoo Finance to discuss the market outlook. Amid declining consumer confidence and a shrinking job market, volatility, according to him, will remain a constant element.
He suggested that signs of job weakness coupled with inflation have impacted consumer confidence negatively, especially after the Fed’s decision. McKinney added that there is a disequilibrium in the number of jobs vacant and the number of workers available right now, leading to weakened employment data.
From an investor standpoint, he deems volatility a constant state of the market, given that the country also has an upcoming election in the coming weeks. In addition to that, geopolitical tensions in Europe and the Middle East will likely add to the turmoil. McKinney shares that investors should focus more on dividend-paying stocks to remain secure and resilient through the volatility.
Despite the turmoil, some stocks may always be promising given their strong footing and dominance in the industry. With that, let’s take a look at the 10 best holding company stocks to buy now.
Our Methodology
To come up with the 10 best holding company stocks to buy now, we examined multiple rankings on the internet and our rankings. We then ranked the top 10 based on the largest number of hedge fund holders at the end of Q2 2024.
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).
A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the best holding company stocks to buy now. The company owns several subsidiaries including Waymo, Verily, BufferBox, and Google.
The company is relentlessly working to improve the Gemini experience and is also actively involved in developing AI hardware, launching its NVIDIA chip rival in May. In addition to that, the company saw significant growth in its computer hardware segment. While Google’s tensor processing units (TPU) only account for almost 20% of the market, its advancements promise higher market shares. Moreover, its six-generation chips are 67% more energy efficient compared to the previous generation of processors. The new chip will be made available to Google Cloud users by the end of 2024.
Overall, the company’s new AI models and algorithms are 100 times more efficient compared to 18 months ago. Alphabet Inc. (NASDAQ:GOOGL) logged revenue worth $85 billion in the fiscal second quarter of 2024, driven by the growing momentum in cloud and search. Additionally, over 60% of generative AI startups and 90% of generative AI unicorns are customers of the Google Cloud.
One can infer that the technology holding company is well-positioned to exploit the next wave of artificial intelligence and innovation, making it a solid investment. Analysts 12-month median price target of $205 points to a 26% upside from current levels. Overall, GOOGL was held by 216 hedge funds at the close of Q2 2024 and Fisher Asset Management was the largest shareholder with a position worth $8.86 billion.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“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.”
Analysts are bullish on GOOGL and their 12-month median price target of $205 points to a 26% upside from current levels. Overall, 216 investors held stakes worth $35.31 billion in Alphabet Inc. (NASDAQ:GOOGL). Of those, Fisher Asset Management was the highest stakeholder with a position of $8.86 billion.
Overall GOOG ranks 1st on our list of the best holding company stocks to buy. While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than 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.