Typically average hedge fund managers Poor performance the Standard & Poor’s 500which means that their clients would actually be better off buying an S&P 500 index fund. However, some fund managers buck the trend, and investors may want to look to them for inspiration.
For example, Larry Robbins of Glenview Capital Management and Louis Sanders of Sanders Capital have both outperformed the S&P 500 by significant margins over the past three years, and both investors have been buying FAANG shares Throughout the bear market that started in 2022.
Since the beginning of last year, Robbins has increased its stake in Amazon (AMZN 2.99%), now representing more than 3% of his portfolio. Meanwhile, Sanders aggressively added to his stake in the alphabet (The Google 0.97%) (GOOGL 1.09%)now making up more than 8% of his portfolio.
Is it time to buy these two FAANG stocks?
The past year has been devastating for Amazon shareholders. The stock price fell 49% – its worst performance since the dotcom crash in 2000 – as the economy produced disappointing financial results.
The company reported a loss in the first and second quarters under GAAP (GAAP), and while it was able to return to profitability in the third quarter, operating income was down 49% year over year to $2.5 billion. But investors need to look beyond temporary economic headwinds.
Despite poor financial results, Amazon was ranked the second most valuable brand in the world in 2022 – behind an Apple – according to Brand Finance, a distinction that reflects its strong competitive position in three growing markets.
Most consumers associate amazon with Electronic trade. The company operates the most visited online marketplace in the world, accounting for nearly 40% of digital retail sales in the US, but Amazon has more exciting growth opportunities in higher-margin markets in the US. Cloud computing and digital advertising.
Research company Gartner Amazon Web Services (AWS) has been recognized as a leader in cloud infrastructure and platform services (CIPS) for 12 consecutive years, and AWS captured 34% market share in CIPS in the third quarter, more than Microsoft Azure and Google Cloud combined.
This puts the company in a good position, as the cloud computing market is projected to grow roughly 16% annually to reach $1.6 trillion by 2030, according to consulting firm Grand View Research. Even better, AWS had an operating margin of 26% last quarter, while Amazon’s retail business rarely hits 5%. This means that the parent company should become increasingly profitable as AWS accounts for a larger portion of its top line.
Amazon also ranks as the fourth largest digital advertiser in the world, and is gaining ground on market leaders such as Google and Meta platforms. This trend bodes well for the company. Digital advertising also comes with much higher profit margins than retail, and global digital ad spending is expected to grow 9% annually to reach $1.3 trillion by 2030, according to Precedence Research.
Currently, the shares are trading at 1.8 sales times, a bargain compared to the five-year average of 3.7. At this price, Amazon stock is an outright buy.
2. The alphabet
Alphabet’s Google was ranked the third most valuable brand in the world in 2022, according to Brand Finance, reflecting the huge popularity of its platforms such as Google Search and YouTube. The former has more than 92% of the market share among search engines, an achievement that confirms its expertise in search engines Artificial intelligenceand YouTube is the best streaming service measured by watch time.
Google has tied that popularity (and the consumer data that those platforms derive from) to a powerful suite of ad technology solutions. include her portfolio Buy side tools It helps brands deliver ads that are relevant to consumers, as well as sell-side tools that help publishers monetize their ad inventory. With this vast ecosystem, Google is the largest advertiser on the planet, taking over 28% of all digital ad money.
Google is also gaining ground in cloud computing, buoyed by investments in product development and market entry capabilities. Google Cloud Platform accounted for 11% of the market share in CIPS in the third quarter of 2022, up from 7% two years ago. As a warning, Google still lags behind Amazon and Microsoft by a wide margin, but the company is a solid third place, and its products are improving more quickly than the market leaders, according to Gartner.
Financially, Alphabet has struggled amid a challenging economy because many brands have slashed their advertising budgets to compensate for slumping consumer demand. The company reported revenue growth of just 6% in the third quarter, and profits fell 24%. But these headwinds are temporary, and Alphabet continues to have a strong position in digital advertising and cloud computing.
Currently, the shares are trading at 4.2 times sales, which is a discount compared to the five-year average of 6.4. At this price, investors should consider buying some shares of this FAANG shares.
Susan Fry, an executive director at Alphabet, is on the board of directors of The Motley Fool. John Mackey, former CEO of Whole Foods Market, an Amazon company, is on the board of directors of The Motley Fool’s. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board of directors. Trevor Genewin He has positions at Amazon.com. The Motley Fool has and recommends positions at Alphabet, Amazon.com, Apple, Meta Platforms, and Microsoft. The Motley Fool recommends Gartner and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a file Disclosure policy.