Stan Wong Alphabet Inc GOOG-Q BUY Sep 12, 2018

Sometimes ensnared in unfavourable headlines. Will probably prevail in US court cases. In his momentum mandate, continues to like and buy. Dominant player in digital advertising through Search, which makes up 70-75% of revenues. Really likes the cloud business (we may be in middle innings of cloud hosting). Lots of "other bets" that could pay off spectacularly. 

Fears that ChatGPT and Perplexity could dislocate them in Search, but Gemini is being wired into the Search functionality and adding value to Search. Behaviour entrenchment in Search will be hard to dislocate. Remember that we use the word "google" as a verb now, which speaks to 25 years of habit-forming consumer behaviour. Will maintain its dominant position as long as it keeps investing in R&D and upping its game.

If you break this up into parts, those parts would be worth more than the sum. The great fear is over search, given chatGPT's threat. About 55% of GOOGL's revenues come from search, but their informational and commercial search is only 40% of all revenues. So maybe 25% of overall revenues are at risk. But YouTube, android and cloud segments are performing very well. You pay 17-18x PE but offers double-digit growth.

Legal problems in US, those in India seem to be resolving. Will do well going forward. Has figured out how to monetize AI for the end user. AI does present a challenge to Search, but this company will innovate. Likes it, will continue to deliver results as a long-term play despite the moments of increased volatility.

Mixed feelings on this one. Warning: rant ahead. Years ago they thought (and still sort of think) that GOOG had all the pieces to win AI. Lots of platforms and good data. Difficulty is that may not matter because it needs to figure out where it's going to fit in AI. 

ChapGPT has become synonymous with AI, and you could argue it's won the consumer subscription game already. Doesn't see anyone displacing MSFT on enterprise solutions; he tried Copilot, and it's still bad, but that doesn't matter because we're all held captive. MSFT is set to win enterprise AI as its AI improves over time.

So where does GOOG fit? He's a big Google fan, and the only person he knows with a Pixel phone. Search is the crown jewel, and such a big part of the overall business. Will they have to cannibalize themselves to win in AI? Competition has never been higher for Search. Older folks say "googling", but young people don't. They "search", and they don't care where they're doing it.

Can still deliver decent results, but the multiple will be capped at the very least. Cheap at the surface level, but there are reasons for that. He's still comfortable holding. Great job in Gemini, for example, but it needs to be monetized. Fun fact: Between ads and subscriptions, YouTube is bigger than NFLX.

Waymo shouldn't be adding to earnings anytime soon. Much capital has been poured into it and potentially much more is needed. He doesn't know the adoption rate of self-driving vehicles or the profitability potential. Look at Waymo as part of the whole Google play.

It remains in the Mag 7 the best performer in the past month and the cheapest as well. They are quieting the bear case in terms of search disruption.

The threat could be that a competitor will eat their lunch in internet search, but on the positive side is that they could lose some share in search, but GOOG also has an AI presence and the search pie could get bigger. Also, YouTube is the largest streamer in the world with over 2 billion active monthly users, and Waymo which is promising.

Lots of hidden value. Negativity on the anti-trust case and impact of AI on Search. Such a premier destination for online advertising. Business fundamentals still very strong. Generates a ton of cash. No loss of Search market share. Unique AI capabilities. Trades at 20x PE, which doesn't include the extra cash on its balance sheet, cloud services, or other subsidiaries. Strong buy today. Yield is 0.48%.

In his firm's momentum portfolio. Dominant in Search and leader in digital ads, which are tremendously cash-generative. YouTube is an increasingly valuable ad property. Cloud services growing rapidly, one of top 3 players. Innovative AI investments should pay off nicely. Waymo is interesting for its cash-generating potential.

Holds the best value among the Mag 7, in terms of forward PE around 18.5x. He liked this at $140-150, less so now.