12 Best Depressed Stocks to Buy Now

In this article, we shall discuss the 12 best depressed stocks to buy now.

The global macroeconomic outlook continues to be in free-fall, with an increasingly grim outlook for the rest of 2022 and a below-trend growth forecast for 2023. According to the latest report by the International Monetary Fund, with winters approaching, an energy crisis looms large over the European continent, and is coupled with skyrocketing costs of living, a sharp tightening of global financial conditions, and an economic slowdown in China. These factors are adding to the headwinds perpetrated by Russia’s invasion of Ukraine in February and the subsequent supply chain disruptions; surging inflation and high interest rates, and soaring fuel prices, to drive the dimmed growth outlook, with the report predicting that the possibility of a recession in 2023 seems more apparent than ever.

According to baseline forecasts conducted by Euromonitor International, real GDP growth for Q4 2022 is set to decline to 1.7% by the end of 2022, and 0.8% in 2023. This points to a deceleration of 0.8 and 0.5 percentage points  respectively, relative to the preceding quarter as most negative growth drivers still remain dominant. The U.S. Federal Reserve’s predatory monetary policies are expected to help curb inflation to an extent, but also take a heavy toll on investment and economic activity. Furthermore, exports in the United States are losing steam amid flailing external demand. As winter approaches, Europe is staring down the barrel of Putin’s gun in the shape of a massive energy crisis. Price hikes are hitting manufacturers and households hard, and business, investment, and consumer confidence is on the decline. The Eurozone economy is set to significantly slow down to 0.6% in 2023. Germany is widely forecasted to enter a recession in the coming quarters, and though rebounding tourism may provide temporary relief to certain European economies, the long-term prospects do not seem favorable.  According to the report, as more economies delve deeper into a recession in 2023, the year is anticipated to be exceptionally tough for investors, businesses, and consumers alike. There are only a few countries that are thriving in this environment (see the 15 fastest growing economies in 2022).

However, even in the midst of such grim macroeconomic conditions, there is opportunity for long-term investors, who are looking for the best depressed stocks to shield themselves from incurring massive losses. A depressed stock is undervalued in comparison to other similar stocks in the same industry and is trading at a price thought to be significantly below its intrinsic value. In this article, we have outlined 12 of the best depressed stocks to buy now, including some mega-cap stocks that are facing temporary headwinds.

Our Methodology

We picked stocks that are currently down 20% or more year-to-date (as of November 9) but show catalysts for strong long-term growth, due to factors like positive analyst ratings, solid financials, and significant growth predictions. These stocks provide attractive entry points for long-term investors. The stocks have been ranked according to the number of hedge funds which hold stakes in them, from lowest to highest.

Insider Monkey’s extensive database tracking 895 elite hedge funds in Q2 2022 was used to gauge hedge fund sentiment around each stock.

12 Best Depressed Stocks To Buy Now

12. Dominion Energy Inc. (NYSE:D)

Number of Hedge Fund Holdings: 30

YTD Decline (As of November 9): 21.05%

Based in Richmond, Virginia, Dominion Energy Inc. (NYSE:D) is a North American power and energy company which supplies electric power and natural gas to multiple U.S. states, including Virginia, North Carolina, and South Carolina. As of Q3 2022, the company beat EPS estimates of $1.08 by $0.03, generating earnings of $1.11 per share. Dominion Energy Inc. (NYSE:D) also posted a total revenue of $4.39 billion in Q3 2022. Like Alphabet Inc. (NASDAQ:GOOG), The Walt Disney Company (NYSE:DIS), and Salesforce Inc. (NYSE:CRM), Dominion Energy Inc. (NYSE:D) is one of the best depressed stocks to buy.

On October 31, Guggenheim analyst Shahriar Pourreza lowered the price target on Dominion Energy Inc. (NYSE:D) to $75 from $90, maintaining a Buy rating on the shares. Although the analyst lowered the baseline utility valuations across the board due to skyrocketing interest rates and forward yield expectations, he also refreshed certain selected estimates from the Q3 earnings season from the Power and Utilities sector to reflect well-known and measurable year-over-year items. This was done to  adjust for seasonality and to realign the stock according to the latest commodity curves.

11. Celanese Corporation (NYSE:CE)

Number of Hedge Fund Holdings: 36

YTD Decline (As of November 9): 38.69%

Headquartered in Irving, Texas, Celanese Corp. (NYSE:CE) is an American technology and specialty materials company which is one of the world’s largest producers of acetic acid and vinyl acetate monomer. The company operates more than 25 production plants and six research centers in 11 countries globally. As of the second quarter of 2022, Celanese Corp. (NYSE:CE) has managed to maintain investor interest, with 36 funds long the stock in Q1 and Q2 of 2022. Furthermore, the company generated a total revenue of $2.3 billion in Q3 2022.

On November 10, Deutsche Bank analyst David Begleiter lowered the price target on Celanese Corp. (NYSE:CE) to $130 from $150, maintaining a Buy rating on the shares. The analyst notes that although the company is currently battling headwinds around the macroeconomic outlook and leverage, Celanese’s (NYSE:CE) has the right management team which is creating opportunities and value in the global business platform. The company’s low valuation is currently providing the perfect entry point for long-term investors, and according to Begleiter, Celanese’s (NYSE:CE) Mobility and Materials acquisition is perfectly geared to achieve higher profitability. Furthermore, the company is a dividend payer, with an annual dividend yield of 2.68% and a quarterly dividend amount of $0.70.

Here is what Vltava Fund had to say about Celanese Corp. (NYSE:CE) in their Q1 2022 investor letter:

“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stocks of Celanese (CE).

Celanese is the world’s largest producer of acetic acid and its chemical derivatives, including vinyl acetate monomers and emulsions. Their applications are used in a wide range of industries, such as automotive tobacco, coatings, construction, energy, telecommunications, food, and medical. Celanese recently closed the acquisition of a large part of DuPont’s business, which will make Celanese an even bigger player in the industry while reducing the cyclicality of it business. The acquisition is quite large and should deliver significant value to shareholders that in our view is not at all presently reflected in the share price. Celanese is a business that stands more or less aside from the main interests of most investors, but it is a company with very high returns on capital, strong free cash flow, and historically very efficient resource allocation.”

10. Moderna Inc. (NASDAQ:MRNA)

Number of Hedge Fund Holdings: 45

YTD Decline (As of November 9): 28.82%

Based in Cambridge, Massachusetts, Moderna Inc. (NASDAQ:MRNA) is an American pharmaceutical and biotechnology company which focuses on RNA therapeutics, primarily mRNA vaccines. As of Q2 2022, hedge fund sentiment around Moderna Inc. (NASDAQ:MRNA) increased, with 45 funds long the stock, up from 41 in the preceding quarter.

On November 7, Chardan analyst Geulah Livshits lowered the price target on Moderna Inc. (NASDAQ:MRNA) to $186 from $188, keeping a Buy rating on the shares. The analyst attributed the rating to the company’s stellar Q3 2022 returns and reiterated that upcoming data readouts from its respiratory and personalized cancer vaccine program are expected by the end of 2022. While the company’s near term valuation in predominantly attributable to COVID, there are multiple modalities and programs currently in pipeline, which possess relevant catalysts that are well-leveraged to support long-term growth, especially as evidence of concepts emerge.

9. Ford Motor Company (NYSE:F)

Number of Hedge Fund Holdings: 46

YTD Decline (As of November 9): 35.12%

Based in Dearborn, Michigan, Ford Motor Company (NYSE:F) is an American multinational automobile manufacturer which specializes in the manufacture and sale of automobiles, commercial vehicles, and luxury cars. As of the third quarter of 2022, the company beat EPS estimates of $0.27 by $0.03, posting earnings of $0.30 per share. Ford Motor Company (NYSE:F) has also managed to maintain hedge fund sentiment around the stock as of Q2 2022, with 46 hedge funds long the stock in Q1 and Q2 of 2022. The stock is a huge dividend payer, with an annual dividend yield of 4.23% compared to the Auto and Truck Manufacturers industry mean of 0.0%. Ford Motor Company (NYSE:F) has been a regular dividend payer since 1973, having a quarterly dividend amount of $0.15.

Like Alphabet Inc. (NASDAQ:GOOG), The Walt Disney Company (NYSE:DIS), and Salesforce Inc. (NYSE:CRM), Ford Motor Co. (NYSE:F) is undervalued at its current valuation. The company’s Q3 2022 bottom line has beat market expectations, with investors holding a favorable outlook on the company’s latest earnings beat. Ford Motor Company (NYSE:F) management lifted its free cash flow guidance for the fourth quarter of 2022, and revisited its 2022 EBIT guidance, maintaining that it completely outshined market expectations. The company’s revenue rose by a reasonably strong 10% year-over-year, as of the third quarter of 2022, posting $39.4 billion against consensus $36.25 billion. The company also exudes brand loyalty, which adds considerably to overall value of the stock. And although macroeconomic pressures and inflationary risks persist, the company’s favorable history of high dividend payouts and valuation metrics could potentially attract long-term investors into a bargain purchase.

Here is what Leaven Partners had to say about Ford Motor Company (NYSE:F) in their Q3 2022 investor letter:

8. ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holdings: 47

YTD Decline (As of November 9): 30.68%

Based in Veldhoven, ASML Holding (NASDAQ:ASML) is a Dutch multinational corporation which specializes in the the development and manufacturing of photolithography machines, which are essential in the production of computer chips. As of 2022, ASML Holding (NASDAQ:ASML) is the largest semiconductor  supplier in the industry.

On November 8, Morgan Stanley analyst Lee Simpson initiated coverage of ASML Holding (NASDAQ:ASML) with an Overweight rating and a $665.8 price target. According to the analyst, ASML Holding (NASDAQ:ASML) is a defensive play within the cyclical semiconductor industry and the high-quality brand name dominated the lithography system supply market, which will shield the company from macroeconomic pressures and high interest rates. The company’s Q3 2022 returns were extremely favorable, completely outperforming expectations and showing strong indicators for growth. As of Q3 2022, the company’s backlog also increased due to record sales, which points to strong demand for the company’s product. And although the stock is currently depressed, strong fundamentals, positive analyst sentiment around the stock, and an annual dividend yield of 1.16% make it an ideal pick for long-term investors.

Here is what Baron Funds had to say about ASML Holding’s (NASDAQ:ASML) solid fundamentals in their Q2 2022 investor letter:

“ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology.

Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward.

Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.”

7. Bath & Body Works LLC (NYSE:BBWI)

Number of Hedge Fund Holdings: 47

YTD Decline (As of November 9): 51.15%

Based in Reynoldsburg, Ohio, Bath & Body Works (NYSE:BBWI) is an American retail store chain that specializes in the production and sale of personal hygiene products, cosmetics, fragrances, and candles. Since the company’s inception in 1990, it has expanded across 6 continents and is currently the largest bath shop chain in the United States. As of Q3 2022, Bath & Body Works (NYSE:BBWI) posted an EPS of $0.52, beating estimates of $0.47 by $0.05. This is largely attributed to the company’s streamlined approach towards production and program development. The stock is also a huge dividend payer, with an annual dividend yield of 2.32% and a quarterly dividend amount of $0.20.

On October 21, Jefferies analyst Ashley Helgans assumed coverage of Bath & Body Works (NYSE:BBWI), lowering a price target on the stock from $47 to $43 and maintained a Buy rating on the shares. According to the analyst, the market for beauty brands is undergoing a quick shift but so far, beauty products have withstood the underlying shift from goods to services by remaining connected to socialization, occasions, and self-care regimens. The analyst forecasted a high-single digit percentage year-over-year sale across mass and prestige, and majority of the increase being attributed to the company’s strong pricing model. Furthermore, Helgans maintains that the brand commands strong consumer loyalty and recognition within the market, and is significantly less vulnerable to inflationary and supply chain pressures compared to other players in the game. Therefore, she ascertains that like Alphabet Inc. (NASDAQ:GOOG), The Walt Disney Company (NYSE:DIS), and Salesforce Inc. (NYSE:CRM), the company’s discounted valuation is not justified and is a bargain for the right investor.

6. Nike Inc. (NYSE:NKE)

Number of Hedge Fund Holdings: 72

YTD Decline (As of November 9): 40.28%

Headquartered in Beaverton, Oregon, Nike Inc. (NYSE:NKE) is an American multinational corporations which primarily specializes in the design, development, manufacturing, global marketing, and sale of footwear, apparel, equipment, accessories, and services. As of Q2 2022, hedge fund sentiment around the company increased, with 72 funds long the stock, up from 67 in the preceding quarter. Nike Inc. (NYSE:NKE) also beat EPS estimates of $0.92 by $0.01, posting earnings of $0.93 per share.

On October 29, Raymond James analyst Rick Patel initiated coverage of Nike Inc. (NYSE:NKE) with an Outperform rating and a $99 price target. The analyst contends that since the stock underperformed in the market in 2022, the market has de-risked the company’s valuations in anticipation of a recession. However, the company’s China segment is widely expected to rematerialize, with profits showing signs of rebound. Deutsche Bank has also reiterated its confidence in China’s economy in Q4 2022, and since a China recovery can mitigate economic headwinds in the U.S, Patel remains positively confident that Nike’s (NYSE:NKE) current discounted valuation can provide an excellent entry point to long-term investors.

Here is what Leaven Partners had to say about Nike’s(NYSE:NKE) long-term prospects in their Q3 2022 investor letter:

“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.

Nike is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s top-line growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future.”

5. Citigroup Inc. (NYSE:C)

Number of Hedge Fund Holdings: 82

YTD Decline (As of November 9): 23.23%

Based in New York, Citigroup Inc. (NYSE:C) is an American multinational investment bank and financial services corporation and is the third largest banking institution in the United States. According to the company’s Q3 2022 returns, Citigroup Inc. (NYSE:C) beat EPS estimates of $1.42 by $0.21, posting earnings of $1.63 per share. Furthermore, the company reported a net income of $3.5 billion on revenues of $18.5 billion in Q3 2022.

On October 27, BMO Capital analyst James Fotheringham lowered the price target on Citigroup Inc. (NYSE:C) to $71 from $76, keeping an Overweight rating on the shares. According to the analyst, although the company’s Q3 2022 returns were mixed, there were some notably slid performances across the Services, Branded Cards, and Retail Services segments of the corporation. Furthermore, Fotheringham asserts that the current resumption of share repurchases by the end of Q3 2022 and the company’s positive dividend payout history, with an annual dividend yield of 4.06% and a quarterly dividend rate of $0.51 per share, serve as catalysts for long-term growth and profitability. At its current discounted valuation, Citigroup Inc. (NYSE:C) provides an ideal entry-point for the long-term investor.

4. ServiceNow Inc. (NYSE:NOW)

Number of Hedge Fund Holdings: 99

YTD Decline (As of November 9): 36.41%

Based in Santa Clara, California, ServiceNow Inc. (NYSE:NOW) is an American software company which specializes in the development of cloud computing platforms to assist companies in regulating digital workflows for enterprise operations.

On October 27, Wolfe Research analyst termed the stock ‘the safest SaaS asset to own into year-end’. The analyst lowered the price target on ServiceNow Inc. (NYSE:NOW) to $475 from $600, maintaining at Outperform rating on the shares. He adjusted his assumptions following the company’s Q3 2022 returns which surpassed consensus across constant currency cRPO, constant currency subscription revenue and operating margins. According to the analyst, the stock is well shielded from macro-economic pressures – something which is not reflected well in the company’s undervalued share price.

As of the second quarter of 2022, investor interest around ServiceNow Inc. (NYSE:NOW) skyrocketed, with 99 hedge funds long the stock, up from 90 in the preceding quarter. Furthermore, in Q3 2022, ServiceNow Inc. (NYSE:NOW) posted an EPS of $1.96, beating estimates of $1.84 by $0.12.

Here is what Baron Funds had to say about ServiceNow Inc. (NYSE:NOW) in their Q3 2022 investor letter:

“ServiceNow, Inc. (NYSE:NOW) is an enterprise software leader offering cloud-based solutions that improve employee workflow efficiency through automation and digitization. The company’s brand, extensive go-to-market reach, and product excellence allowed it to materially grow its business with the largest companies in the world, including 80% of the Fortune 500. As of its latest quarter, the company had over 1,400 customers spending close to $4 million per year on average, and recently announced a $250 million contract with a governmental entity. ServiceNow’s industry-leading customer renewal rates of over 97% underscore the criticality of the company’s solutions to its customers. The stock underperformed as quarterly bookings were negatively impacted by longer-than-expected sales cycles due to macroeconomic dynamics creating a more complex spending environment. In addition, with international revenues accounting for about one-third of the company’s business, investors expect foreign currency and pricing dynamics to generate additional headwinds. We continue to believe in the company’s long-term opportunities as it benefits from digitization initiatives, a unique and growing product line, and strong management team.”

3. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holdings: 109

YTD Decline (As of November 9): 42.66%

Based in Los Angeles, California, The Walt Disney Co. (NYSE:DIS) is an American multinational mass media and entertainment conglomerate. Despite a particularly weak Q3 2022, Wall Street remains confident that the slump is due to macroeconomic pressures and not due to company-specific challenges. The Walt Disney Co. (NYSE:DIS) has voiced plans to increase the ad-free subscription to Disney+ to $10.99, up from $7.99. Furthermore, the company demands commendable brand loyalty and has a firm grip on the content streaming market, making the possibility of a rebound incredibly likely.

On November 9, UBS analyst John Hodulik lowered the price target on The Walt Disney Co. (NYSE:DIS) to $122 from $135, maintaining a Buy rating on the shares. The analyst points out that the company’s Q3 2022 earnings miss is largely attributable to a higher DTC dilution and weaker parks margins. Hodulik adds that although the current macroeconomic climate does pose significant challenges, The Walt Disney Co. (NYSE:DIS) still remains excellently leveraged to make a successful transition to a streaming future.

Here is what Third Point had to say about The Walt Disney Company’s (NYSE:DIS) long-term prospects in their Q3 2022  investor letter:

“As disclosed in our Q2 letter, we reinitiated a significant position in The Walt Disney Company (NYSE:DIS) when the company retested its COVID lows earlier this year. At the current price, Disney is trading for little more than the stand-alone value of its Parks business and a mere 15x ’24 “street” consensus. The company remains early in its Direct to Consumer (“DTC”) transition with a leading market position, and yet the current stock price ascribes negligible value to the streaming business. We believe this is due to questions around the terminal economics of streaming, given large losses being generated today at Disney (>$1 billion dollars last quarter) and stagnating margins at peers such as Netflix. On the last earnings call, management highlighted three items that could lead to an inflection in DTC profitability over the next 12 months: a 38% price increase for Disney+ in the US; moderating growth in cash content expense; and an advertising tier for Disney+ launching in two months that can drive additional ARPU given high demand for the Disney brand amongst advertisers.

While the company has guided to Disney+ achieving breakeven sometime within the fiscal year ending September 2024, the valuation suggests the market remains skeptical. Disney only trades at ~14x the $7 in earnings generated prior to the Fox acquisition, which implies investors don’t expect earnings to meaningfully exceed this figure in the coming years. Hence, the first value driver we highlighted in our last letter is the opportunity for management to optimize Disney’s cost base to drive earnings growth. We believe Disney has ample means to rationalize costs across its operating platform and deliver targeted content for home viewing that does not entail the same cost structure of exclusive theatrical releases…” (Click here to view the full text)

2. Salesforce.com Inc. (NYSE:CRM)

Number of Hedge Fund Holdings: 116

YTD Decline (As of November 9): 39.64%

Based in San Francisco, California, Salesforce Inc. (NYSE:CRM) is an American cloud-based software company which specializes in providing customer relationship management software and applications focused on sales, customer service, marketing automation, analytics and application development. In the third quarter of 2022, Salesforce Inc. (NYSE:CRM) posted an EPS of $1.19, beating estimates of $1.02 by $0.17. Total revenue generated by the company in Q3 2022 was $7.72 billion. In Q2 2022, hedge fund sentiment around Salesforce Inc. (NYSE:CRM) became more favorable, with 116 funds having stakes in the stock, up from 114 in the preceding quarter.

On November 10, Oppenheimer analyst Brian Schwartz lowered the price target on Salesforce Inc. (NYSE:CRM) to $200 from $240, maintaining an Outperform rating on the shares. The analyst’s research mosaic uncovers mixed business trends for the company in Q3 2022. However, Schwartz remains confident that the company has an expansive installed customer base to capitalize upon and a highly profitable subscription revenue stream which is projected to play an important role in shielding the company from the current economic climate. The analyst reiterates that the shares are grossly undervalued and expects that Salesforce Inc. (NYSE:CRM) will conclude its multiple contraction with Cloud Suite driven growth and improve margins.

Here is what ClearBridge Investments had to say about the overlooked potential of Salesforce Inc. (NYSE:CRM) in their Q3 2022 investor letter:

“Software has been a solid long-term performer for the Strategy and a key point of differentiation versus the benchmark. But even recurring revenue businesses enabling digital transformation are not immune from the vagaries of the COVID-19 recovery. Salesforce, Inc. (NYSE:CRM) (-12.8%) has detracted from results due to slowing revenue growth driven by a combination of factors, including pull-forward of enterprise digitization demand during COVID-19, some operational missteps, and lengthening sales cycles.

We believe the company still has ample room for revenue growth across its various platforms and should benefit from budget consolidation as customers seek control over tech spending in a weakening economy. We also see significant room for margin expansion. While we have trimmed our Salesforce (CRM) exposure, we maintain confidence that the stock will rerate to a level that reflects its growth potential.”

1. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holdings: 191

YTD Decline (As of November 9): 35.58%

Based in Mountain View, California, Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company which parents Google and several other Google subsidiaries. The stock’s discounted valuation sheds light upon the fact that the market is ignoring the considerable increase in subscription rates of the company’s YouTube Premium services, despite the declining macroeconomic climate. Furthermore, the company’s introduction of Pixel Pass and increased compatibility with YouTube Premium services will pave the way to a Google ecosystem, with skyrocketing subscription rates acting as leverage to attain e-commerce goals.

On October 26, Deutsche Bank analyst Benjamin Black lowered the price target on Alphabet Inc. (NASDAQ:GOOG) to $120 from $130, keeping a Buy rating on the shares. Although the company’s Q3 returns did not meet Wall Street expectations, the analyst contends that the stock is still best-positioned compared to other players in the market. Black expects solid long-term advertising revenue growth driven by Search and YouTube, strong Google Cloud momentum, and option value in other areas. Although the advertisement business suffers due to macroeconomic uncertainties, Google Cloud has shown it is more than capable of covering the advertisement deceleration as it outperforms peers. Furthermore, Alphabet Inc. (NASDAQ:GOOG) has entered into a hiring freeze which will further aid in maximizing operational efficiency.

Here is what Mayar Capital had to say about Alphabet Inc. (NASDAQ:GOOG) in their Q3 2022 investor letter:

“In early January this year – which admittedly feels like eons ago – US President Joe Biden was pushing Americans to take up the government’s offer of free COVID tests to help tackle the surging omicron variant. How did Biden respond when citizens asked about the availability of these tests?

“Google it!”

This advice, undoubtedly well-meant, was roundly scoffed at by the press, however. It seemed too obvious to be very helpful.

Anyway, the anecdote serves to introduce you to one of our largest holdings, Alphabet; the parent company of Google. Note that first, Alphabet’s original and core product – its search engine – has entered our common vocabulary as a verb. ‘Googling’ something has the same meaning as ‘researching’ or ‘finding an answer to’ something. Second the reason Biden’s advice was met with such opprobrium was because Googling something has become almost second nature to us now.

These two observations reveal a lot about Google’s strength in the search engine market, in which it has a share of over 90 percent. Because internet search is almost the prototypical network, Google has benefitted from – and we think is also protected by – the huge competitive advantage its scale brings – both to those asking the questions and those providing the answers. The Google search platform becomes increasingly useful to anyone seeking information as a greater volume of stuff becomes available. This starts a virtuous cycle that results in a colossal market share for Google itself. In the language of business strategists, Google benefits from vast network effects.

Because Google’s search results are viewed by billions of eyeballs every day, its search page ‘real estate’ is understandably very valuable to those with goods and services to sell. Advertising revenues from this ‘real estate’ as well as that from its other properties such as Mail, Maps, and so on, totaled almost USD 150b in 2021; amounting to almost 58% of the company’s revenues. Ad sales on YouTube, also owned by Alphabet, brought in another USD 28b. With the secular shift of the advertising spend to digital channels – over which Alphabet has a tight grip – we estimate the company has a share of around 40% of the digital advertising market and is probably the most valuable advertising property in the world…” (Click here to see the full text)

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Disclosure: none. 12 Best Depressed Stocks To Buy Now is originally published on Insider Monkey: