Alphabet stock: why I recently sold Warren Buffett’s latest buy
Warren Buffett’s latest investment, Alphabet (NASDAQ: GOOG) stock, has shot up recently. Over a six-month timeframe, itâs up almost 90%. Now, Iâm a fan of Alphabet but when the stock hit $326 in November, I decided to sell around a fifth of my holding.
Hereâs why I made this move.
A legendary company
The owner of Google and YouTube, Alphabet’s a world-class company. And right now, itâs doing a lot of things right.
Just look at what it’s done in the generative AI space. Not only has it enhanced its search offer with tools like AI overviews and AI mode, but it’s also released powerful new AI applications such as Gemini 3.0 and Nano Banana Pro, which are on par (if not better) than products from ChatGPT owner OpenAI.
Itâs worth noting here that Gemini now has around 650m monthly active users, so itâs now really starting to compete with ChatGPT.
The massive catch-up in generative AI is only part of the story here however. Another huge attraction is the companyâs cloud computing division and powerful chips.
Right now, Alphabetâs cloud division is growing faster than Microsoftâs and Amazonâs. Meanwhile, there are rumours that Meta is looking at using Googleâs high-powered tensor processing unit (TPU) chips for AI.
Add in the fact that Alphabet has a streaming platform (YouTube) that generates almost as much revenue as Netflix and a self-driving taxi division (Waymo) that generates far more revenue than Teslaâs robotaxis, and thereâs a lot to like. Ultimately, thereâs a ton of long-term growth potential here.
Why am I selling?
Why did I sell some stock then? A few reasons. One was the speed of the share price rise.
Back in May, the share price here was around $150 and the market-cap was around $2trn. Today however, the share price is above $300 and the market-cap is near $4trn. Thatâs a huge share price rise, and a massive increase in market-cap, in a short space of time. That spooks me a bit.
Another was the valuation. After the recent share price jump, Alphabetâs price-to-earnings (P/E) ratio is about 30. Again, that unnerves me a little too. Over the last five years, the P/E here has typically been between 18 and 22.
The third reason was just risk management. After its jump to $326, Alphabet was the largest holding in my portfolio (I first bought near $65).
I thought it was prudent to take some profits and rebalance my portfolio. Because while the company has momentum at the moment, there are still plenty of risks for investors (competition from OpenAI and Big Tech companies, a slowdown in digital advertising spending, weakness in AI stocks, etc).
Better opportunities in the market today
Iâll point out that even after selling a fifth of my holding, Alphabet’s still one of my largest positions (currently, my fourth-largest individual stock holding).
I remain excited about the long-term growth story here. I just donât see the stock as a buy today â right now Iâm focusing on other opportunities in the market.
The post Alphabet stock: why I recently sold Warren Buffettâs latest buy appeared first on The Motley Fool UK.
Should you invest £1,000 in Alphabet right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Alphabet made the list?
More reading
Edward Sheldon has positions in Alphabet, Amazon, and Microsoft. The Motley Fool UK has recommended Alphabet, Amazon, Meta Platforms, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
