Giverny Capital, an investment management company, recently published its fourth-quarter investor letter in 2022. A copy of the same can be downloaded here. The model portfolio of the firm appreciated 8.49%, net of fees in the fourth quarter compared to a 7.56% return for the Standard & Poor’s 500 Index. For 2022, the fund delivered a -22.65% return compared to a -18.11% return for the Index. Oil and energy was the strongest sector in the year increased by 65%. In addition, you can check the top 5 holdings of the fund to see its best picks for 2022.
Giverny Capital highlighted stocks like Alphabet Inc. (NASDAQ:GOOG) in the Q4 2022 investor letter. Headquartered in Mountain View, California, Alphabet Inc. (NASDAQ:GOOG) is a multinational technology company. On January 27, 2023, Alphabet Inc. (NASDAQ:GOOG) stock closed at $100.71 per share. One-month return of Alphabet Inc. (NASDAQ:GOOG) was 13.50%, and its shares lost 24.44% of their value over the last 52 weeks. Alphabet Inc. (NASDAQ:GOOG) has a market capitalization of $1.294 trillion.
Giverny Capital made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) lost its spot as our largest holding, falling to third after losing 39% of its value. What drove this collapse? Well, Alphabet figures to generate only about $65-to-$70 billion of free cash flow for 2022. So there’s that.
Fact is, that’s a massive number but lower than analysts expected for the year. When growth companies stop growing, the stocks generally suffer. Alphabet did not enter the year enjoying an especially rich multiple of price-to-earnings, but it continued hiring people and investing in innovation even as revenue growth slowed, meaning expenses were not in sync with revenue.
I think it’s important to remember that Alphabet’s revenue will be up about 10% for 2022. That is on top of 43% growth in 2021. Alphabet remains a grower; it simply needs to manage expenses better. With the steep drop in its market value, the company now generates a free cash flow yield of about 6%. It has $100 billion of cash on hand, about 8% of the market cap. Alphabet trades at a PE multiple roughly in line with the S&P 500.
Lately, some wags have fretted that artificial intelligence in the form of “chatbots” will steal search volume from Google. I believe Alphabet has a leading position in AI and won’t lose its edge in search efficiency any time soon, although it may incur higher computing expenses as it incorporates AI into search capability. I’d also note that in mid-January Alphabet announced modest layoffs and, as with Meta, the stock responded positively.”
Pixabay/Public Domain
Alphabet Inc. (NASDAQ:GOOG) is in 6th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 156 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the third quarter, which was 153 in the previous quarter.
We discussed Alphabet Inc. (NASDAQ:GOOG) in another article and shared L1 Capital’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
