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Alphabet (GOOGL) stock price is rising. The stock is trading at around $1,350. However, it is believed that it may reach the level of $1,700.
Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) stock prices have risen in the last trading day. The rise in prices came after comments by investment legend Bill Miller. Sources say that Miller indicated that Alphabet (GOOGL) stock is among those to short at this time.
At the time of filing this report, Alphabet (GOOGL) stock was at $1,352 (+0.22%) in the pre-market. Yesterday to closed at $1,349.02, having gained $1.97% from the previous close.
Meanwhile, an analyst from Deutsche Bank increased the price target for Alphabet (GOOGL) stock to $1,700 per share. Earlier the target price level was $1,625. “We think investors underestimate how disciplined the company can be on costs, both pre-COVID and coming out of COVID, under new leadership,” the analyst said.
Alphabet (GOOGL) Stock Price Rise despite Millers’ Letter
He indicated this in his 2020 first-quarter investor letter. He said that he heard financial commentators on TV advising investors to use the decline to upgrade their portfolios. Miller also said that these commentators were advising investors to buy the big-name stocks that are outperforming the market. This is to avoid the riskier stock who aren’t performing at this time.
Miller’s response to this trend was the reverse. He said that such portfolios will have issues as the market recovers. Miller mentioned several of the top-performing stocks. These stocks have had minimal negative performances at this time. He said:
“Typical issues in the quality bucket include companies such as Alphabet, Disney, Nike, Amazon, Facebook, Procter & Gamble, and Clorox”.
“Now these are all very fine companies and we own several of them. I think, though, that a portfolio comprised of all “quality” names, names that have been among the best performers in this dramatic decline, will almost certainly be a portfolio that underperforms the market as the economy and the market recover. In big market declines, the prices of stocks fall more rapidly than long-term business values”.
Miller also said in the investment letter that there have only been about four major stock buying opportunities in his lifetime. The COVID-19 pandemic presented the fifth.
This approach underscores Miller’s guiding philosophy. He is known for several feats. One of them is his being able to beat the S&P 500 for 15 years. He did this during his time at Legg Mason Capital Management. His stellar record shows that he has a point.
As the stock market recovers, the underperforming stocks will have extreme levels of value reversal. The top-performing stocks at this time will have some capital outflows. This is bound to occur as investors seek profit-making opportunities.
Bill Miller’s Predictions May Come True
Bill Miller’s hedge fund also made 120% returns in 2019. That is more proof of the pudding. Sources place alphabet stock as the fifth most popular stock right now. This means that if Miller’s predictions come true Alphabet will lose some of its gains. This is expected by contrarian investors to occur as the economy evens out.
It also shows the wisdom in the contrarian investment approach. If everyone is doing something then maybe it’s a time to do the opposite.
Warren Buffett and other legends in the investment game seem to think so as well.