One hedge fund manager I keep a close eye on is billionaire Bill Ackman, who runs the FTSE 100–listed investment fund Pershing Square Holdings. A long-term value/quality investor with an amazing track record, Ackman is known for his ability to spot a lucrative investment opportunity
Recently, I was looking at Ackman’s holdings and noticed that, at the end of 2023, he had more than 10% of his fund invested in a well-known stock I own. Interested to know what company I’m talking about? Read on…
A world-class growth stock
The stock I’m referring to is none other than Alphabet (NASDAQ: GOOG). One of the so-called ‘Magnificent 7’ companies, it’s the owner of Google and YouTube and also has a fast-growing cloud computing business.
Ackman initially invested here in March of last year when the stock was under pressure due to concerns that ChatGPT might disrupt its business model. This purchase was very well timed – since the end of March 2023 it has risen more than 50%.
Potential for further gains?
Looking ahead, it appears Ackman sees the potential for further gains from the stock.
In the Pershing Square Holdings annual report for 2023, he said that Alphabet – which is a dominant player in the fast-growing digital advertising market – has the potential for both profit margin expansion and capital returns.
He also said the company is deeply involved in artificial intelligence (AI) and that it’s uniquely well-positioned to deliver AI advances.
His view is that, over time, AI will lead to a ‘natural evolution’ of Google’s search product.
We continue to believe Google is one of the most advantaged and scaled players in AI with an unmatched business model. The company’s stock currently trades at approximately 19 times forward earnings, a deep discount to its peers despite its similar rate of projected earnings growth.
Bill Ackman
A long-term hold for me
I like Ackman’s view on Alphabet stock because it’s very similar to my own stance.
Ultimately, I believe Alphabet’s going to be a major player in the AI industry (which is still in its early days) and that the company will benefit from the roll-out of this technology.
I also think it has an attractive valuation at the moment and that there’s potential for further share price gains (over the medium to long term). Compared to the other Magnificent 7 stocks, Alphabet shares offer a lot of value, in my view.
Of course, there’s some uncertainty in relation to the future of search. The fact that ChatGPT has become a verb could present some challenges for Google in the future.
However, given that the company has multiple revenue streams (Google, YouTube, cloud computing, etc) I’m comfortable with this uncertainty.
I plan to hold on to this world-class growth stock for the long term.
