Here’s How Andreas Halvorsen’s Viking Global Managed A Terrific Q4

#3 Alphabet Inc (NASDAQ:GOOGL)

– Shares Owned by Viking Global (as of September 30): 2.53 million

– Value of Holding (as of September 30): $1.6 billion

After the company changed its name to Alphabet Inc (NASDAQ:GOOGL) from Google its stock gained 22% during the fourth quarter and reached a lifetime high of $798.69 during that period. Viking Global reduced its stake in the class C stock of the company by 8% during the third quarter and trimmed its ownership of class A shares by 2% to 1.12 million shares.

Ever since former Morgan Stanley CFO, Ruth Porat, joined as the company’s new CFO in July last year, things seem to be improving at Google. The company has managed to beat the analysts’ earnings estimate by a wide margin in its last two quarterly reports and also authorized a $5 billion stock buyback program last October. Moreover, the Street widely applauded Alphabet’s move to change its structure under which Google will be one of the many different operating units under its umbrella, which also includes other ‘moonshot’ projects like self-driving cars.

In his third-quarter letter to investors, Halvorsen said that Alphabet “was the biggest winner” among the fund’s long positions, so the small reduction in positions could have been due to profit-taking or portfolio rebalancing reasons. The investor reiterated his core thesis on the company, which is focused on Alphabet’s transition to mobile from desktop.

“In our opinion, prevailing concerns around this transition are misguided and mobile represents a tremendous revenue opportunity. During the quarter, the stock price appreciated on strong earnings growth in support of our thesis. Pricing on mobile advertising improved, narrowing the gap to desktop ad pricing; YouTube views accelerated meaningfully; and desktop search continued to grow. We think that the secular shift of advertising dollars from traditional media to search and YouTube will drive substantial revenue growth going forward,” Halvorsen said.

The investor also considers that Alphabet’s margins are bound to grow due to a “less aggressive hiring” and that the management will be focused on incremental operating efficiencies and streamlining capital allocation.

“We find the current valuation compelling, especially in light of the company’s growing net cash position, and the likelihood that strong revenue growth combined with improved cost control will result in a higher price-to-earnings multiple,” Halvorsen added.