Warren Buffett May Favor Alphabet for 2024 After A Stock Split

Published December 27, 2023

In the world of investing, there are few names as revered as Warren Buffett, the mastermind behind Berkshire Hathaway. Known for his preference for profitable, industry-leading companies, Buffett’s potential investment choices are closely watched by investors worldwide. In recent times, stock splits have gained attention, with companies that execute forward splits demonstrating strong performance and innovation — a criteria that closely aligns with Buffett's investment strategy.

A Glance at Notable Stock Splits

A stock split occurs when a company divides its existing shares into multiple ones to lower the share price, making it more accessible to retail investors without affecting overall market valuation. Since mid-2021, several high-profile companies have undergone stock splits, including tech giant Nvidia, e-commerce behemoth Amazon, and electric vehicle pioneer Tesla. Buffett himself has invested significantly in Amazon since 2019, despite its high valuation multiple which typically is not the norm for his value-focused investment approach.

The Contender for Warren Buffett's Portfolio

Within the realm of stock-split stocks, one stands out as a strong candidate for Buffett's portfolio in 2024: Alphabet, the parent company of Google and YouTube. Despite not previously being part of Berkshire Hathaway's holdings, Alphabet exhibits many characteristics admired by Buffett and his team. With Google's dominant market share in internet searches and YouTube's substantial ad-revenue generating power, Alphabet is seen as an attractive investment.

Moreover, the investment gurus at Berkshire Hathaway are no strangers to ad-fueled businesses and understand their cyclic nature, with periods of economic expansion typically outlasting recessions. Alphabet’s stock buyback program and its compelling valuation — trading at a forward P/E ratio consistent with the S&P 500 but with higher growth projections — further solidify its appeal to Buffett's investment philosophy.

While Alphabet does not distribute dividends, its strong capital return strategy through share repurchases makes it alluring for investors. Given Buffett's and his team's preference for buying exceptional businesses at fair prices, Alphabet, after its stock split, holds the promise of a potentially wonderful addition to the Berkshire Hathaway portfolio in the coming year.

Buffett, Alphabet, Investment