Searching

Each year we pick a Big Tech stock we think will outperform its peers. In November 2022 we picked Meta as our stock of 2023. For 2024 our pick is Alphabet. I believe Alphabet has been over-punished for its flaccid response to AI, as Meta was for its stupidity regarding the Metaverse and headsets. Alphabet still sits on cash volcanoes (as does Meta), and if 2023 was AI Star Wars, 2024 will be AI The Empire Strikes Back. Note: Stock picking is fun, and you can learn by doing it, but the research is clear — buy low-cost index funds. Anyway …

Google Search is likely the best (most lucrative) business model of this millennium. The company’s monopoly on search garners a 24% net profit — on 91% of the $190 billion search business. Google redeploys some of these earnings to dig moats, offering free apps for email, word processing, videos, mobile OS, and mapping which protect the Red Keep (search) from marauders. Despite this, its parent company, Alphabet, is the cheapest stock (by PE ratio) in the Magnificent 7. Its shares have risen 144% in the past five years, bettering only Amazon, and behind Meta’s 198%, Microsoft’s 261%, Apple’s 313%, Tesla’s 964%, and Nvidia’s 1,900% increases. The market views businesses with a naked eye, and what it sees in Alphabet is a great company hamstrung by the Innovator’s Dilemma.

Συνέχεια εδώ