The average investor can find potential buying opportunities by looking at what some prominent billionaire hedge fund managers own in their own portfolios. Bill Ackman of Pershing Square Capital Management, Chase Coleman of Tiger Global Management, and Chris Hohn of TCI Fund Management, collectively worth an estimated $25 billion, are worth keeping tabs on.
All these billionaires manage massive sums of capital and also love one monster tech stock. Continue reading to learn more about this business and whether it can continue its reign in 2025.
Two strong years
In a difficult 2022, Alphabet's (GOOGL +1.71%) (GOOG +1.99%) shares fell 39%. Weakening conditions in the digital-advertising market, most likely sparked by the Federal Reserve's decision to aggressively hike interest rates (which led to recession fears), created a tough operating environment for the company.
However, Alphabet has come roaring back in remarkable fashion. As of this writing on the afternoon of Dec. 31, 2024, the stock is up 115% since the start of 2023. That gain has helped Ackman, Coleman, and Hohn in their respective funds, as they all adopt long-term investment philosophies.
In 2023, Alphabet's revenue climbed 9% year over year before rising 15% through the first nine months of 2024. The resilient digital-ad industry has provided a solid backdrop for the business. What's more, the emergence of artificial intelligence (AI) capabilities has benefited Alphabet's various products and services, making the company more valuable to its user base.
The company's bottom line is also getting a boost. After reporting a 26% operating margin in 2022, the business was able to turn 32% of its Q3 2024 sales into operating income. A focus on cost cuts and streamlining operations has helped in this regard.
NASDAQ: GOOGL
Key Data Points
Looking ahead
Since the start of 2023, Alphabet has undoubtedly been a winning stock. But it's worth pointing out that the stock's price-to-earnings ratio (P/E) ratio increased by 44% during this time. Shares have gotten more expensive, which isn't a surprise, given the overall stock market's performance.
I don't believe the rise in the P/E ratio means Alphabet is off limits for prospective investors. You can buy shares right now at a P/E of just 25.2. That's on par with the S&P 500's 25.2 ratio and makes Alphabet the cheapest stock among the glorified "Magnificent Seven" group by that metric.
It's telling that Ackman, Coleman, and Hohn remain Alphabet shareholders even after an incredible price run-up in the past two years. Investors looking to buy shares today won't struggle to find compelling reasons to own this dominant business.
According to Wall Street consensus analyst estimates, Alphabet's revenue and earnings per share are slated to increase at compound annual rates of 11% and 13%, respectively, between 2024 and 2026. This outlook can definitely lead to investor optimism. And I believe those double-digit gains can keep happening for a long while.
It's really not a stretch to see Alphabet continue on its impressive trajectory for the foreseeable future. The company will benefit from the growth of digital advertising and other secular trends, like cloud computing and streaming entertainment. In addition, Alphabet's Waymo division gives it potential in autonomous driving technology, which could be a major moneymaker one day.
All this provides the company with a favorable environment in which to continue growing its top line at a healthy clip. That can lead to higher earnings over time, potentially providing compelling returns for investors.
