John ZechnerAlphabet IncGOOGBUYDec 02, 2024

Reduce your risk by owning different layers in the tech sector. One of the 10 companies that make up 40% of the S&P; index funds got hurt badly yesterday. Tech is highly volatile. They're growth assets, which require lower (not higher) interest rates.

Stubbed its toe on earnings. FCF went negative because of all the AI capex. MSFT fared better. You need a hyperscaler in your portfolio, but pick just one of GOOG, MSFT, or AMZN.

He trimmed it earlier in the year after making a huge gain. He likes their business, but has the narrative changed--and this applies to the other hyperscalers too. For new money, buy half a position now, after today's pullback. Is a high-quality company and he likes it.

They posted disappointing top and bottom line numbers, with search missing. Shares after hours plunged over 10%. 

A major holding of his. It's firing on all engines, earning $100 billion profit. It grew into then surpassed its market cap. It will continue to make cash profits from its search engine, etc, but what will be their rate of return from AI? Is perhaps cheap. 

They report next week. Last quarter, cloud was up 82% though they went free cash-flow negative. They will reiterate the guide in capex. He expects cloud to be strong.

His firm always looks through the lens of "Would they buy it today?" Making a significant bet on the future of AI, and market's questioning that. Companies building data centres are under pressure. Now cashflow-negative. Broke long uptrend. 

Risk. Be cautious. A show-me story. Just broke below 200-day MA, and there's lots that can go wrong below that.

They operate diverse businesses, and their cloud business remains strong. Gemini 3 is a fantastic product and can compete with Anthropic. It outperformed last year, so has underperformed slightly this year, but a catch-up will happen in 2027.

It's been in an uptrend since early 2025, but wouldn't jump on it yet. This year has seen a modest downtrend.

He tries to allocate $$ for the best return with the least amount of risk. Knock on the whole complex is the massive spending. Fears that AI could disrupt Search, perpetual anti-trust overhang.

Cloud growth staggering last quarter, revenue up 82%. Search was up, so AI is not cannibalizing it (but increasing queries).  Clear AI payoff through multiple avenues. Trading ~22x PE, growing ~19%. PEG looks really good. Yield is 0.26%.

If you look at the 3 biggest hyperscalers today, the best position is probably in GOOG. Doing lots of internal development and investment in its AI models. Gemini is lagging Anthropic and OpenAI, but it's a close third. GOOG is really at the forefront of innovation, especially compared to the other 2 hyperscalers.

She owns no hyperscalers right now.

This one, but don't put all your eggs in the one basket. It just has so many horses in the race. About 75% of revenue comes from advertising. Cloud business generates a whole lot of money. Very strong with Gemini, and now agentic AI has come out. Robust short-term liquidity. Current and quick ratios are well above 1. Low debt-to-equity. ROE of 38.1%. PE is ~17x.

The #1 holding in his fund. His 12-month price target is $428. Buy some here, more around support at $320. Shouldn't go under $300.

Revenue's grown 26% on average, per year, for the last decade. That's quite transformative. Subscriptions plus cloud are growing quickly. Valuation's quite attractive compared to historical comparisons. Attractive entry level at 16.7x forward PE. Small yield of 0.26%.