This S&P 500 stock looks crazily mispriced to me

My funding hero, Warren Buffett, argues that traders ought to “by no means guess towards America”. He additionally states that an investor’s easy aim needs to be to “purchase shares in good firms at honest costs”. Thus, I’ve been trawling by way of the US S&P 500 index on the lookout for nice companies with (quickly) depressed share costs.

In different phrases, I’m on the hunt for what I name ‘fallen angels’ — strong firms whose shares have been affected by promoting stress or unfavorable sentiment. And I consider I’ve discovered one such candidate throughout the group of mega-cap tech shares generally known as the Magnificent Seven.

Good previous Google

Alphabet (NASDAQ: GOOG) is the proprietor of ubiquitous search engine Google, utilized by billions of individuals worldwide every single day.

Alphabet additionally owns the world’s greatest video-sharing platform, YouTube, and cellular working system Android — in addition to a bunch of different digital services and products. The agency can also be making strides in cutting-edge tech similar to synthetic intelligence, quantum computing, and robotics.

Regardless of its many divisions and tasks, Alphabet’s actual energy lies in internet marketing, the place it’s the world chief. Alas, a US authorized ruling claims that Google’s market management quantities to an unlawful monopoly in on-line search and promoting.

Then once more, is that this doubtless to lead to large fines and even a break-up of Alphabet throughout this presidential time period? I say not, as President Trump is famously pro-business and anti-regulation. It’s this perception that leads me to conclude that Alphabet shares are too low cost proper now.

S&P 500 shares droop

As I write (23 April), Alphabet shares commerce at $159.41, valuing this web Goliath at over $1.9trn. This is sort of 1 / 4 (-23.6%) beneath the stock’s all-time excessive of $208.70, set on 4 February. To me, this can be a worth droop that has gone too far, too quick. If solely I’d been in a position to purchase the shares once they crashed to their 52-week low of $142.66 on 7 April. Oh effectively.

This leaves this well-liked S&P 500 stock buying and selling on a modest a number of of 18.6 occasions trailing earnings — the bottom by far among the many Magazine 7. A modest dividend yield of 0.5% a 12 months gives a bit of earnings, however I see Alphabet as a development stock. And if revenues, earnings, and money move beginning rising strongly once more, then the shares might observe swimsuit.

Then once more, if I’m unsuitable, then an opposed ruling towards Alphabet can be disastrous for shareholders. A pressured break-up of the corporate might destroy its franchise, synergies, and community results. Even so, I’m quietly assured this received’t occur but — fingers crossed.

For the document, my spouse and I’ve owned Alphabet stock since 3 November 2022, the very day it hit that 12 months’s low. Immediately, we’re sitting on substantial earnings, however we regard our stake as a core long-term holding. In abstract, we’ll dangle on tightly to this S&P 500 stock and await developments!