Alphabet:Position Changes

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2023 February 9

I sold the complete remaining position @92,74EUR or approx. 99,89USD.

Reasons:

• Microsoft is attacking Googles monopoly in search. If Bing proves to be a real alternative they might not only loose market share but their monopoly margins might break due to increased ad price competition. Microsofts CEO Satya Nadella thinks ad prices will reduce.
• OpenAI is also integrated into Bings search algorithm itself. Microsoft claims that this caused the largest relevance jump in 2 decades. Another very large threat to Googles search dominance and relevance at the core.
• First tests and demonstrations of Bing with OpenAI included seem to be very attractive.
• My testing at bing.com reveals that usage is fast, optically pleasing and search results relevance seem to be on par with Google.
• Google stock did not sufficiently adjust to new realities and the first real danger it's facing in decades. Yesterdays selling could just be the first phase on investors getting their heads around of what's going on. There is a saying on the market which says "If you panic, panic first." and i think we are still early enough to panic.

Opinions/Additional Arguments

2023 February 3

I reduced the alphabet position by 35 %.

Reasons:

• Alphabet is facing potential long term disruptions to it's search business model by both generative ("ChatGPT") and discovery Ais. ("Reels", "TikTok")
• Valuation of approx. 22.5 times current P/E or 20 times adjusted for their excess cash seems high in current interest, macro and competition environment.
• We don't see a very clear path to neither revenue growth or meaningful cost reductions in the short run.
• Alphabet's high revenue and market capitalization base makes longterm growth harder than in the past. The market might increasingly saturate.
• Market Sentiment seems too positive at the moment. E.g. 2 Year yields at little over 4% seem too low. As the labor market stays strong we expect higher interest rates for longer.
• Restructuring charges are still to come.
• There might be a narrative flip against Alphabet at one point e.g. if competitive dangers gain traction and eps seems more ugly.
• There might be a better buying opportunity in the $60-$80 range.

Opinions/Additional Arguments

2023 January 26

Sold another 15%.

but are still holding onto it given our expectation that

• the overall online advertising market continues to grow for years to come

• alphabet has substantial cost saving potentials (helped by increasing automatization and ai)

• alphabet could find ways to capitalize on new ai workflows themselves.

2023 January 25

Copied from Discord.

I sold approx 13% of the alphabet position today. (And considering selling more) My main reasons are:

• Strong Ai advances from Meta and TikTok. Consumers could „discover“ ever more products via video or feed instead of searching for them.
• New competition from the likes of ChatGPT that could decrease the importance of search
• Relatively high valuation in comparison to other portfolio companies.