‘Alphabet (GOOG) Must be Disciplined Over Investment Spending’ Says Giverny Capital

Giverny Capital Asset Management LLC, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 15.39% was recorded by the fund for the Q4 of 2020, above its S&P 500 benchmark that returned 12.15%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Giverny Capital, in their Q4 2020 Investor Letter said that their largest stake of equity is invested in Alphabet Inc. (NASDAQ: GOOG), because they have optimistic views in the company. Alphabet Inc. is a global conglomerate business and is the parent company of Google. It currently has an immense $1.2 trillion market capitalization. For the past 3 months, GOOG delivered a decent 21.43% return and settled at $1,917.24 per share at the closing of January 26th.

Here is what Giverny Capital Asset Management has to say about Alphabet Inc. in their Investor Letter:

“Alphabet is our largest holding. We’re biased, but we’d argue that Alphabet is reasonably priced. It earns significant profit from travel related searches, which are way down this year. Travel spending figures to roar back at some point, possibly soon. Alphabet also spends extravagant amounts on R&D and capital spending as it finances younger ventures. Those other businesses, which include YouTube, Waymo selfdriving cars and cloud computing centers, plus research in artificial intelligence, should eventually generate meaningful returns for shareholders. Or at worst, they will consume less investment over time. If Alphabet simply exercises discipline over investment spending for a few years as travel advertising rebounds and the core search business grows, the resulting free cash flow should generate satisfactory returns for owners.”

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Last December 2020, we published an article telling that Alphabet Inc. (NASDAQ: GOOG) was in 150 hedge fund portfolios, its all time high statistics. GOOG delivered a 26.04% return in the past 12 months.

Our calculations show that Alphabet Inc. (NASDAQ: GOOG) is ranked 7th in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.