Alphabet Inc (GOOG)

Under lots of pressure: potentially losing the AI race, global advertising market, some threat to Search. These haven't manifested yet in the financials. Good job at capex spending, invests about 1/3 of cashflow back into the business, and that's why it's so hard to dethrone it. 17.5x earnings, massive amount of hidden value. Be patient.

GOOG faces an existential crisis: Are reports that Samsung will ditch Google and use Bing instead. Also, GOOG faces anti-trust threats from regulators over the digital ad market. Alphabet has invested money in various bets that aren't going anywhere, like Fitbit or Waymo. But if search revenues are split with Bing, that will impact Alphabet hard; search is their core business.

Their cloud will be profitable. Shares are holding up vs. the market.

Top search place for people selling products and, so, advertisers. 18x earnings, $50B in free cashflow, great balance sheet. YouTube is a great asset. Still lots of growth in digital advertising, currently has strongest market share. Their AI will get there eventually. No dividend.

The question was on buying Google or Apple. He likes all the big techs. They are safe havens which will see very good earnings per share growth over the next 3 to 5 years through cost cutting. This includes Amazon which has some of the best businesses in the world, not the retail part though, which could improve with cost cutting. Google is cheaper than Apple but is facing more competition, although Bing is not a threat to the Google search engine. People are loyal to Apple products which are addictive.

Tech is merely a momentum trade and won't last. That's why he bought Google this week, and he will keep some of it long-term. Three years from now, stocks will be higher than where they are now. Tech fundamentals no better today than last week. 

Great company.
Like large tech stocks despite rising interest rates.
Wait to buy. 
Hoping shares fall before falling.

He bought a position this morning. There will be challenges, but it's cheap and they will be more efficient coming out of this cycle. He got comfort from the court hearings today.

AI is an area of growth, product launch hiccup is no big deal. Incredible market share in Search, marketing, and advertising. MSFT has only a 3% share in Search. Will get a lot of the $200B global digital ad business. Despite an ad recession, that area's going to grow. 18x earnings. Has beaten its cost of capital every year it's been public. No dividend.

GOOG used to have a motto, "Don't be evil." Then quietly, they said don't worry about that. Future remains to be seen. Every tech that seemed to have had a natural monopoly faces competition. ChatGPT is that competition right now. Wait till you see a plan that you can understand as to how GOOG will retake dominance. 

A big question is how will AI affect the search business. Google will probably have a competitive product but how will advertising revenue be affected. It is making new lows on a relative strength basis. Look to other areas of the market.

If shares weren't so inanely cheap, he would have given up on this. His enthusiasm for it has certainly cooled.

All of tech has been trashed. Higher valuation multiples came down. Biggest area of growth has become online advertising, and this has become a lot more cyclical since it's a bigger part of the economy. This may be a risk in an economic downturn. Bigger issue is the whole move to AI. GOOG makes money on the clicks, so AI may make GOOG somewhat irrelevant. A new risk to be aware of. He's not going all-in on it anymore, because a couple of its businesses are facing some shorter-term risks.

His largest holding now. He can hold onto a losing stock because he makes it up with his hedges. He understands its intrinsic value. Price target of $121, very decent 20-25% runway ahead. So many horses in the race. Bard is strategic, last week's stumble was not much of a mistake.

If the stock market is like a horse race, this is one stable with a dozen very competitive horses in the race. Biggest digital advertiser in the world, by a long shot. YouTube, which has yet to be monetized. Waymo is the leader in autonomous driving. No dividend.