TIP847: Alphabet (GOOGL): The Megacap That Still Might Be Underrated w/ Kyle Grieve & Shawn O’Malley

SPEAKER_1 (0:00)

You're listening to TIP.

Shawn O'Malley (0:03)

Welcome back to The Investor's Podcast, episode 847 Kyle, the last time revisited a company that I had previously pitched on the show, that was with Comfort Systems, where we admired the business but decided that not buying it, despite it going up 5X was the right decision because we really couldn't underwrite just how much they were benefiting from this AI capex super cycle. Turns out they're benefiting a lot. But I want to be upfront with everybody that having us revisit a stock is not automatically a happy occasion.

Kyle Grieve (0:35)

Well, it won't be all pain for you today, Shawn. So the good news is that today we actually own this name. So whatever we conclude, nobody can accuse us of just watching from the sidelines. The other good news is that not only do we own this, but it's actually up over 90 percent since we added it to the intrinsic value portfolio.

Shawn O'Malley (0:50)

I think that does make for a much more pleasant conversation. I did notice while re-listening to the original episode, I had an entire section discussing how Alphabet's biggest problem was having too much cash and not knowing what on earth they were going to do with it. Well, they seem to have solved that problem so thoroughly that they needed to go out and raise another $175 billion just to be safe.

Kyle Grieve (1:13)

That is exactly why I want to do this episode with you. So let's get into it.

SPEAKER_1 (1:20)

Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly and sharing everything we learn with you.

This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investment in the securities discussed. Now, for your hosts, Shawn O'Malley and Kyle Grieve.

Kyle Grieve (2:06)

So, I'm really excited about this one as Alphabet is actually the second largest position inside of the Intrinsic Value Portfolio with a weighting of around 14%.

Now, Alphabet has always been a business that interested me simply because I just use so many of its products daily, and as a user, I just don't really actually see much of a reason to switch to anything else. So on a daily basis, you know, I'm using things like Gmail, I'm using their search engine, their browser, their web-based office applications and even Google Home. So, you know, I think it's pretty safe to say that I'm a pretty die-hard user of Google products, and yet I've never actually owned any Google shares. So it's a bit of a strange conundrum. But what really struck me when I was prepping for this episode is that the Alphabet that you added to the portfolio 18 months ago has actually evolved pretty dramatically in that time frame. And I don't just mean the stock price. The business has made choices that I just didn't really expect, at least in terms of scale. And I have just the person in chat with me to help me understand just how big of a mistake I'm making by not at least having a starter position in my personal account.

Shawn O'Malley (3:02)

I won't give you too much of a hard time, Kyle, for not owning Google. Maybe I'll just tease you behind your back. But no, all jokes aside, we all have our winners that we wish we had had more of and wish that we were able to get all of our friends to buy into. But it just doesn't always work out that easily. And that's perfectly fine. But the beautiful part of Google, in my view, is that it's not going anywhere. I mean, this is a company that is a real titan. That's to say, in 5 to 10 more years, I think Alphabet, which is the parent company name that we'll use interchangeably today for Google, will have a much higher intrinsic value than it does today. But I've also got to know some of your preferences as an investor, Kyle, and that is to say, you typically are not one to invest in large caps, certainly not mega caps. So is it fair to say that if maybe we imagined a scaled down version of Google with, I don't know, maybe a $10 billion market cap, instead of this being this $4 trillion behemoth, you probably would own shares in it. Is that fair?

Kyle Grieve (4:02)

I would say that you're completely correct there. I'm definitely biased towards smaller businesses, mainly because I'm just really focused on finding multi-baggers. But as Google has gone up nearly 100% since you first added it to the intrinsic value portfolio, I think that it's just simply a really, really good example that you can still make multi-bagger-like returns for businesses with multi-trillion-dollar market caps.