Billionaire hedge fund managers don’t get their status by making bad investment decisions. They tend to avoid very hot growth stocks, which can be volatile and affect overall returns if they sink. Instead, many look to large companies that they think can rise in value.
One of the most popular investments recently has been Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). This stock was a popular buy during the third quarter, as billionaire hedge fund managers, such as Israel Englander (Millenium Management) and Steve Cohen (Point72), acquired shares. It is also on top of holdings in other hedge funds, such as Chase Coleman at Tiger Global Management, where Alphabet makes up 7.3% of the portfolio.
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With Alphabet being the most popular stock among billionaires, could it help boost your path to becoming a millionaire?
Unless you have a large cash account, it is unlikely that holding Alphabet stock alone will make you a millionaire. Instead, investors should be looking for a company that can beat the market, which can quickly become a millionaire as part of a portfolio of stocks.
Alphabet can help you personally this way, as its businesses are doing well.
Alphabet’s primary business is advertising, which revolves around the Google search engine. Although it also generates advertising revenue from other properties, such as YouTube, about three-quarters of its advertising revenue comes from search engines. This could become a problem in the near future, as the Justice Department is looking to crack down on Alphabet by forcing the sale of its Chrome browser.
The divorce calls are the result of a judge’s ruling that Google had an illegal policy in the search space. However, this is not the end of the story of Alphabet. It can still appeal the sentence, and the judge is not expected to make a decision until next summer. Some analysts also believe that the incoming Trump administration may change the DOJ’s position on this matter.
Meanwhile, Alphabet may already be planning how to maintain its profits even if it is forced to remove its Chrome browser.
These concerns have led to one of the key investment points of Alphabet’s stock: It is extremely undervalued compared to the broader market. The S&P 500 it trades at 23.5 times forward earnings. Alphabet trades at just 20.9 times forward earnings.