We recently compiled a list of the 10 Best Stocks To Invest In According to Billionaires. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other billionaire-approved stocks.
Billionaires and top hedge fund managers typically dominate the stock market, focusing on leading companies with strong track records and exceptional performance. They usually don’t waste time with underperformers—they target the market’s elite.
The Stock Market Rally
Before diving into the top stock picks among billionaires, reviewing how the market has performed so far this year is essential. On September 18, the Federal Reserve cut its policy rate by 50 basis points, lowering it to 4.75%–5.00% from 5.25%–5.50%. This move fueled a market rally, pushing stocks to a new intraday record high, and marking the 39th all-time high of 2024—the first since mid-July. Minneapolis Fed president Neel Kashkari acknowledged that while the rate cut was unusual historically, shifting the policy focus from controlling high inflation to addressing a weakening labor market was necessary. Here are some comments:
“Right now, we still have a strong, healthy labor market. But I want to keep it a strong, healthy labor market, and a lot of the recent inflation data is coming in looking very positive that we’re on our way back to 2%. So I don’t think you’re going to find anybody at the Federal Reserve who declares mission accomplished, but we are paying attention to what risks are most likely to materialize in the near future.”
Market expectations point to an equal probability of the Federal Open Market Committee (FOMC) cutting rates by either a quarter- or half-percentage point at its November meeting, with a higher chance of the larger reduction in December. Overall, markets are signaling the Fed’s intent to bring rates to a “neutral” level that neither stimulates nor restricts economic growth.
What the Top Dogs of Wall Street are Saying About the Market
For nearly two years, bulls have dominated Wall Street, driven by a resilient U.S. economy and growing enthusiasm around artificial intelligence (AI). This momentum has propelled the Dow Jones Industrial Average, the S&P 500, and the tech-heavy Nasdaq Composite to multiple record highs in 2024. Despite the surge, not everyone seems hopeful about the market, with some of the most influential billionaire investors, including Warren Buffett of Berkshire Hathaway, signaling caution. Buffett, known for his long-term optimism, has been a net seller of stocks for seven straight quarters.
On the other hand, billionaire investor Ray Dalio recently raised concerns about the “enormous amount of debt” burdening the U.S. economy. He cautions that neither former President Donald Trump nor Vice President Kamala Harris is likely to focus on addressing debt sustainability in the upcoming presidential election, suggesting that the pressure from the $35.3 trillion national debt will persist, regardless of the election outcome.
Our Methodology
In this article, we analyzed Insider Monkey’s exclusive database of billionaire stock holdings to select the 10 stocks with the highest number of billionaire investors. These billionaires are founders or managers of some of the world’s leading hedge funds and companies.
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 Billionaire Investors: 34
Alphabet Inc. (NASDAQ:GOOGL) is a tech giant operating through segments including Google Services, Google Cloud, and Other Bets. The company offers a wide range of products, including ads, Android, Chrome, Search, and YouTube, and continues to dominate the search market while integrating artificial intelligence to enhance user experiences.
Evercore ISI recently revised its price target for Alphabet Inc. (NASDAQ:GOOGL), lowering it from $225 to $200, but maintained its Outperform rating. The revision is linked to concerns about the ongoing Department of Justice antitrust trials and potential remedies that could see Google lose 20% to 50%+ of its U.S. search market share. However, Evercore ISI believes the impact on Alphabet’s earnings per share would be minimal, with a potential market share loss of 60% only affecting EPS by a single-digit percentage, thanks to savings on Traffic Acquisition Costs.
In the second quarter, Alphabet Inc. (NASDAQ:GOOGL) reported a 14% increase in total revenue, reaching $84.74 billion. YouTube generated $8.7 billion in advertising revenue, up 13% year-over-year, while Google Cloud saw a 29% jump in revenue, surpassing $10 billion. With a solid balance sheet and strong free cash flow, Alphabet Inc. (NASDAQ:GOOGL) has initiated dividend payments, confirming a $0.20 dividend with a 0.49% yield as of September 23.
As of the end of Q2 2024, 34 billionaires tracked by Insider Monkey held stakes in Alphabet Inc. (NASDAQ:GOOGL), with a combined value of $13.4 billion.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ: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.”
Overall GOOGL ranks 2nd on our list of the stocks to invest in according to billionaires. While we acknowledge the potential of GOOGL as an investment, we believe that there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than GOOGL, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.