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Okay, first move we need to talk about.
This is a biggie.
Berkshire Hathaway, they are buying, Warren Buffett specifically is buying even more Google.
Yes, Buffett just added another 45% to his position in the A shares, and he's bumped the C shares up to a 3.2% position in the Berkshire portfolio as well.
So this is now his fourth largest holding, and the crazy thing is Google has arguably got an even better value over the past three months as well.
Back when we covered the first quarter filing, Google was trading around a PE of 30, and Simply Wall St had it sitting at 20% overvalued from their discounted cash flow.
Well, fast-forward to now, two things have happened.
One, earnings have absolutely taken off, up to $244 billion over the past 12 months.
And what that's done is it's pulled the PE ratio all the way down to about 17.
You can see it here on the five-year chart.
It's actually sitting near the bottom of its PE range for the last few years.
It's the business getting so much more profitable that the multiple has actually compressed, and that shows up on the valuation side, too.
Simply Wall St's discounted cash flow model now has Google around 22% undervalued, so a very big swing from where it was last quarter.
But to be clear, the business hasn't really changed, right? It hasn't changed all that much in one quarter, and the plan hasn't changed either.
They are still spending an enormous amount of money.
You can see it in the free cash flow numbers, right? Earnings of $244 billion, but free cash flow of only $53 billion.
Look at the discrepancy now.
It's massive.
It's going into data centers.
It's going into chips.
It's going into the hyperscaler arms race, as we call it.
Okay, first move we need to talk about.
This is a biggie.
Berkshire Hathaway, they are buying, Warren Buffett specifically is buying even more Google.
Yes, Buffett just added another 45% to his position in the A shares, and he's bumped the C shares up to a 3.2% position in the Berkshire portfolio as well.
So this is now his fourth largest holding, and the crazy thing is Google has arguably got an even better value over the past three months as well.
Back when we covered the first quarter filing, Google was trading around a PE of 30, and Simply Wall St had it sitting at 20% overvalued from their discounted cash flow.
Well, fast-forward to now, two things have happened.
One, earnings have absolutely taken off, up to $244 billion over the past 12 months.
And what that's done is it's pulled the PE ratio all the way down to about 17.
You can see it here on the five-year chart.
It's actually sitting near the bottom of its PE range for the last few years.
It's the business getting so much more profitable that the multiple has actually compressed, and that shows up on the valuation side, too.
Simply Wall St's discounted cash flow model now has Google around 22% undervalued, so a very big swing from where it was last quarter.
But to be clear, the business hasn't really changed, right? It hasn't changed all that much in one quarter, and the plan hasn't changed either.
They are still spending an enormous amount of money.
You can see it in the free cash flow numbers, right? Earnings of $244 billion, but free cash flow of only $53 billion.
Look at the discrepancy now.
It's massive.
It's going into data centers.
It's going into chips.
It's going into the hyperscaler arms race, as we call it.
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