Ensemble Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be seen here. While this recent quarter represents the fund’s largest degree of underperformance, so too did its 2020 results. In 2020 the Fund was up 30.89% vs the S&P 500 up 18.39% for 12.51% outperformance. It is clear to us that the pandemic has caused much larger and more rapid relative swings in asset pricing as investors struggle to grapple with the implications of an economic event of an unprecedented nature. In this context, you can see that the fund’s first-quarter underperformance of 11.03% is clearly a bad outcome, and yet is not inconsistent with other periods of weak performance that have occurred in the context of its long-term track record of outperformance. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Ensemble Capital mentioned Alphabet Inc. (NASDAQ:GOOG) and explained its insights for the company. Founded in 2015, Alphabet Inc. (NASDAQ:GOOG) is a Mountain View, California-based multinational technology conglomerate holding company with a $1.6 trillion market capitalization. Alphabet Inc. (NASDAQ:GOOG) delivered a -11.36% return since the beginning of the year, while its 12-month returns are up by 13.10%. The stock closed at $2,564.91 per share on April 20, 2022.
Here is what Ensemble Capital has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q1 2022 investor letter:
“Google (6.6% weight in the Fund): Google is one of the most extraordinary businesses of the digital age. Its mission is “to organize the world’s information and make it universally accessible and useful.” This is such a broad organizing principle for a company whose value is built on doing just that. When you think about the mass adoption of the Internet, smartphones, social and digital media, and e-commerce among billions of users every day, and the exponential growth of data that has brought, we all know how valuable Google’s role in collecting, organizing, and filtering all that information has become in our daily lives.
NVidia’s CEO Jensen Huang put the challenge really well in an interview with Tech Analyst Ben Thompson recently:
“We know that there are a trillion things on the Internet and the number things on the Internet is large and expanding incredibly fast, and yet we have this little, tiny personal computer called a phone… how do we possibly figure out of the trillion things in the internet what we want to see on our little tiny phone?
Well, there needs to be a filter in between… basically an AI, a recommender system. A recommender that figures out based on the nature of the content, the characteristics of the content, the features of the content, based on your implicit and your explicit [preferences], find a way through all of that to predict what you would like to see.
I mean, that’s a miracle! That’s really quite a miracle to be able to do that at scale for everything from movies and books and music and news and videos and you name it.”
While Huang was talking about the role of artificial intelligence more generally amidst the data explosion, it’s hard not to think of Google as most fitting the role of the Internet’s leading “recommender system,” with its de facto role as the gateway to the Internet. In fact, it’s no coincidence that Google is a leader in AI technology, which it applies across most all of its services…” (Click here to see the full text)
Our calculations show that Alphabet Inc. (NASDAQ:GOOG) ranks 5th on our list of the 30 Most Popular Stocks Among Hedge Funds. Alphabet Inc. (NASDAQ:GOOG) was in 158 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 156 funds in the previous quarter. Alphabet Inc. (NASDAQ:GOOG) delivered a -3.94% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Alphabet Inc. (NASDAQ:GOOG) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
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