HF perspective on Google (Alphabet)
Curious on what those in HF think about buying into Alphabet. I have kept it as a core in my portfolio for the past year or so and I have been growing my position. When I initially started buying in, my HF friends were not fans of the company. Recently over the past year though, they have been jumping in and building positions. Seems like the company is starting to give investors FOMO. What are the general thoughts on the company from your experiences?
I have not been a TMT analyst for a while (was at a pod in a L/S portfolio covering TMT exclusively), but I would say that, regardless of it is a good case or not, you don’t make money by having most of your peers have the same idea and holding the same positions. You beat them by being first, somewhat of a contrarian. So I only worry about HFs and their positions if it goes hand-in-hand with my idea. Great idea, but priced-in by a bunch of HFS? Probably limited upside. But a great idea that no HF has any position in? Sign me the fuck up.
So TL;DR: fuck whatever HFs think. You make money with a variant view, not a consensus view. After all, if it is consensus OW, then who is the marginal buyer?
Tell that to the people who might have missed out on NVDA up another 82% YTD since it was a "consensus OW"; although generally I agree. I know you can slam me with the "what is required to be up another 25%-50% from here", and I'm not making a call on NVDA, but when your opportunity cost is SP500, which is effectively an actively managed large cap growth fund these days, it makes things difficult.
I bucket my PA into a few portions, with some stuff being more beta driven or closing tracking error vs. index, and some stuff being more concentrated long term bets.
For HF crowd, obviously going to depend on their investment mandate and what they are trying to deliver. I'm sure Coatue/TCI/Ackman is trying to come up with the 3yr-5yr call on GOOGL, which will be stacked 12-18m outlooks, but ultimately driven by their argument on future AI winners and how search evolves + the economics of it all (as well as the "cultural" issue). Within this framework I skewed more bullish GOOGL, esp. through 4Q-1Q. And then the MMHF crowd is its own universe where most of this doesn't matter. They will largely be trying to understand this debate, but are more pre-occupied with ST direction on capex + costs and search #s/ad market trends as we build towards the unknowable future state of search/AI/LLMs; until we see true returns on this spending, the only day-to-day drivers of stock will be that + the daily sentiment call on GOOGL's AI future from whatever forces are dominating the news cycle.
So can HFs like GOOGL? I think yes. Can consensus OW's still make money and be a good part of portfolio? I think yes, but its not going to get the same attention as the "hot" $7bn market cap with a massive variant perception and KPIs inflecting upwards imminently offering a 7:1 risk/reward (but mag 7 still drove all the returns anyways)
Which is why I stated “possibly limited upside”, not an affirmation. Ultimately, one has to analyze and identify a variant view based on what they consider to be the drivers that the market has been mispricing.
NVDA’s gains are more because of a repricing in what the company has become - from a GPU developer to an AI powerhouse. At the time I was analyzing it, nobody even looked at AI, at least not seriously, just like people did not look at cybersecurity seriously.
However, I do believe that when most HFs have a consensus OW, I tend to shy away a bit. But I ALWAYS analyze the company first - wouldn’t make any sense to have a conclusion before the analysis.
nothing against your larger point, but coatue is a fast money shop
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