We recently compiled a list of the 10 Most Profitable Stocks of the Last 10 Years. In this article, we are going to take a look at where Alphabet (NASDAQ:GOOG) stands against the other profitable stocks.
In an interview with CNBC on October 14, Michael Kantrowitz, Chief Investment Officer at Piper Sandler noted that while the market is expensive, it’s not a reason to get bearish and that unless a risk arises, the market will likely stay expensive. Kantrowitz explains that the market’s valuation is driven by the pricing out of risks that existed two years ago, such as inflation and higher interest rates. He believes that if these risks were to resurface, it would be a reason to get worried, but currently, that’s not the backdrop.
He also notes that investors should focus on stocks with continued earnings momentum, as these names will likely see the best outperformance and can hold their expensive multiples for longer. Kantrowitz is not too concerned about higher bond yields but notes that they can be a problem at some point. He thinks that yields would need to reach 4.25% to show up in the broader market.
Regarding earnings revisions, Kantrowitz believes that revisions coming down have not overdone it and that it’s normal to see estimates from the sell-side start out high and then trickle down throughout the year. He expects to see more downward earnings revisions but notes that large-cap stocks have held up far better in terms of earnings, which is why they continue to outperform.
Tom Lee, Managing Partner and Head of Research at Fundstrat Global Advisors discussed the markets and his recent observations. Lee believes that the market’s resilience is due to the large amount of cash on the sidelines. He thinks that investors have been under-invested in stocks and that the market is becoming less dependent on macro data.
Lee pointed out that the market has been able to shrug off negative news and that the recent PPI and CPI reports were not enough to knock the market off track. He believes that the Fed will continue to be dovish, especially since inflation is still tracking towards the 2% target. Lee also thinks that the election, which is becoming less of a coin toss, is also contributing to the market’s conviction.
Regarding the impact of the election on the market, Lee believes that markets like visibility, but they also need to like what they see on the other side of the election. He thinks that whether Trump or Harris wins, stocks will do well next year, but there will be differences in sector and asset class performance depending on who wins.
While some may be concerned about the market’s expensive valuation, others see it as a sign of strength and resilience, with that in context, let’s take a look at the 10 most profitable stocks of the last 10 years.
Our Methodology
To compile our list of the 10 most profitable stocks of the last 10 years, we used the Finviz and Yahoo stock screeners to compile an initial list of the 30 largest companies by market cap. From that list, we narrowed our choices to companies with positive TTM net income and 10-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 10-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Our list is sorted in ascending order of the 10-year net income growth rates.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 smallcap and largecap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet (NASDAQ:GOOG)
10-Year Net Income CAGR: 20.96%
TTM Net Income: $87.66 Billion
Number of Hedge Fund Investors: 165
Alphabet (NASDAQ:GOOG) is the parent company of Google, the world’s largest search engine, and a leader in digital advertising, cloud services, and artificial intelligence. Alphabet’s (NASDAQ:GOOG) diverse portfolio includes YouTube, Google Cloud, and Android, giving it a dominant presence across multiple sectors. The company continues to invest in innovative areas such as autonomous vehicles (Waymo) and life sciences (Verily).
Despite facing numerous challenges and threats to its dominance, Alphabet (NASDAQ:GOOG) remains a resilient company with a strong track record of innovation and growth. The company is growing its presence in emerging areas such as cloud computing, artificial intelligence, and online video.
Alphabet’s (NASDAQ:GOOG) Google search business remains a cash cow, with a market share of over 90% and growing search volumes. The company’s YouTube platform is the largest video-sharing platform in the world, with a vast library of content and a growing subscription base. Google Cloud is also gaining traction and a growing market share in the cloud infrastructure market. Furthermore, Alphabet’s (NASDAQ:GOOG) investments in artificial intelligence, including its Gemini AI platform, position the company for future growth and innovation.
Alphabet (NASDAQ:GOOG) has a long history of investing in research and development, this investment has led to the development of products and services such as Google Cloud, Google Assistant, and Google Home, which have become major contributors to the company’s revenue growth. Alphabet’s (NASDAQ:GOOG) commitment to innovation and R&D has also enabled the company to stay ahead of the competition and maintain its leadership position in the technology industry.
Alphabet (NASDAQ:GOOG) is a compelling investment due to its dominant position in search, its growing presence in emerging technologies such as cloud computing and artificial intelligence, and its strong financial performance. The company’s commitment to innovation and R&D, combined with its strong track record of growth and profitability, make it an attractive investment opportunity for those looking to benefit from the growth of the technology industry. Analysts estimate Alphabet’s (NASDAQ:GOOG) earnings will grow by 27.63% this year. With a consensus Buy rating from industry analysts, the stock has a target price of $198.85, which represents a 17.47% upside potential from its current level.
Overall GOOG ranks 8th on our list of the most profitable stocks of the last 10 years. While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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