Alphabet Inc (GOOG)

He's the most interested in this name among the megatechs. Yes, regulatory issues and fines, but the real question is whether Perplexity is eating into GOOG's search business. If no, then GOOG is very cheap.

The one with uncertainty, because of DOJ litigation as well as competition on Search (especially from the new one, Perplexity). He still really likes it though, because it has so many horses in the race.

They own 92% of online search, but they will lose some of that to AI. So, GOOG will stake out their place in AI, including search. Other initiatives: 2 billion worldwide watch YouTube and Waymo, the leading driverless car technology. They spend $33 billion a year on R&D, and they boast a good history of R&D. Shares trades cheaply, below the market PE, but grow much faster.

Inexpensive, lots of hidden value. Excess cash, lots of businesses. Cloud services is not yet profitable. Getting value for your money. Number of outcomes possible from anti-trust. If forced to be broken up, you'll win. If forced to provide Search for free, you'll also win. Yield is 0.4%.

DOJ is looking at possibly of breaking it up, but it was just a passing comment as a potential remedy. It would be years away, with legal appeals along the way. Looking back to 1980 when a monopoly company (AT&T) was broken up, it benefited shareholders. Most research shows that people will still prefer the Google search engine. Stock's back up today. 

Down 16% from recent highs. 1.4x PEG ratio, pretty cheap. Search has 90% market share right now. YouTube and Google Cloud continue to grow quickly. Yield is 0.49%.

His largest holding. It will take years before anything comes out of this anti-trust suit, so he's not worried. The feds won't force the company to break up. He's comfortable holding it. They own internet search and have a solid balance sheet. A great performer over time with predictable earnings growth. There are high barriers to compete in search. He's used Perplexity and finds it okay, but their market share in search is small.

His largest position. He buys whenever the stock shows weakness.

Owns shares in Microsoft and Meta - not Google. Strong company, but doesn't own shares. Anti-trust problems actually a good sign for business - means company is very strong. Is a good company if already own. Even if company is broken up - would be good for investors (lots of good assets). 

Trades at 18x PE. They spent $32 billion last year on R&D, and some of it yields amazing products, mostly AI. Such research is a long process. Is a great long-term hold. Cash flow is huge.

Down to 200-day MA, down 15-20% from highs. Still unrivalled global leader in Search and digital advertising, commanding 90% of global market share. Digital ads are 75% of overall revenue, and continues to grow. Its cloud is third after AMZN and MSFT, but it's a growing market. YouTube's doing well. Yield is 0.5%.

Hardware sales diversify the revenue stream. Trades at 1.2x PEG, with 15+% earnings growth projection. Regulatory risk has always been there, hard to tell if it's intensifying. Might be, but it is diversifying and the name is still an opportunity given its valuation and pullback.

It has grown its revenue and earnings along with the other big techs. At 18X next year's earnings it is priced much lower than Apple, Amazon, etc. which are trading at 30X. It would be very interesting if it broke up into different parts.         Buy 57  Hold 11  Sell 0

Recent share price weakness might be a good opportunity to buy. Lawsuits are weighing companies ability to generate profits. A.I. products not as good as others, but YouTube product very strong. Overall, is a quality business that is good for long term investors. However, in the short term - expecting volatility. Ad business also very strong. 

Among the lowest PEs in the Mag 7. They will continue to dominate online search, despite questions over gen AI. They're upgrading their AI though. As a major cloud player, they are benefitting from the rise in data centres and AI. At some point, shareholders may say they're not seeing returns in GOOG's capex spending, which happened to Meta a few years ago. If they stop spending, they will have even more cash, which is already healthy. The overhang now is the anti-competitive ruling, which will be a long process. GOOG will do well long-term and she will continue to hold it.

20 years ago it went public and has gained 7,736%. It's a big winner for him. It continues to reinvent itself. Five years ago, he spoke to the CEO who predicted a big cloud business soon, and now earn $42 billion.

We think this could be a sarcastic way of saying GOOG is showing complacency in innovation relative to other AI companies. Also, GOOG has been criticized recently for over-hiring, which the company has corrected in recent quarters. It is true that large organizations are not as nimble as start-ups, but at the same time, large, well-established companies also possess a more sustainable business model for investors to compound capital more safely.

There is something the venture capital community refers to as the “Innovators Dilemma”, where large organizations (such as IBM, ORCL, etc.) are usually being disrupted by new technologies as the new solutions do not look attractive (usually new technology has lower margins) and does not fit their main business models which have also been their cash cow for many years. MSFT has been the exception where the company reinvented itself to the new technological trend. Therefore, we think technological disruption is what investors need to monitor over time with companies like GOOG, that being said, we think in the near term, it would be really hard to replace GOOG, but the risk should be kept in mind for long-term shareholders. We would note that GOOG spent $47B on research in the last year, and perhaps the CEO is trying to light a fire under employees to ensure this spending results in future growth. 
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