Alphabet's Contrarian Play: Why Weitz's Underperformance Signals a Buying Opportunity

Amidst a sea of defensive bets and tech skepticism, the Weitz Multi-Cap Equity Fund's Q1 2025 adjustments to its Alphabet (GOOG) holdings offer a rare contrarian signal. While the fund's broader portfolio underperformed benchmarks, its $2.51 billion stake in Alphabet—a 6.36% increase from the prior quarter—hints at a strategic bet on the company's undervalued growth trajectory. Pair this with insider selling that masks long-term confidence and a valuation still below its peers, and Alphabet emerges as a compelling buy.

The Weitz Paradox: Underperformance Masks a Bullish Bet

The Weitz Multi-Cap Equity Fund, known for its value-driven, concentrated approach, increased its Alphabet holdings despite a 6.98% turnover rate—a metric reflecting both additions and reductions. While the fund sold out of two Alphabet positions and trimmed five others, it added to three holdings and purchased one new stake. The result? Alphabet now accounts for 89.42% of the fund's top 10 holdings, signaling a contrarian focus on intrinsic value over short-term volatility.

This concentration is striking. The fund's average holding period for Alphabet's top positions (3.6 quarters) suggests patience, even as broader markets grew skittish about tech. Meanwhile, Alphabet's Q1 revenue surged 12% year-over-year to $90.23 billion, with cloud and AI segments booming. For a fund that emphasizes a “private-buyer mindset,” this aligns with a view that Alphabet's stock is trading at a discount to its true worth.

Insider Selling: A Compliance Play, Not a Sell Signal

Critics might point to recent insider selling as a red flag, but the data tells a different story. Sundar Pichai, Alphabet's CEO, sold $10.2 million in shares in Q1 2025—a prearranged move under a Rule 10b5-1 plan. Similarly, CFO Ruth Porat offloaded $6.6 million in shares. These transactions, while notable, are part of standard wealth management strategies, not panic exits.

Crucially, insiders retained $420 million in holdings on average, and the stock price remained stable around $160 during the sales. Regulatory pressures, such as the April antitrust ruling against Google's ad tech practices, may have prompted prudent risk management, but executives are doubling down on Alphabet's long-term potential.

Valuation: A Discounted Giant in Growth Mode

Alphabet's valuation metrics scream opportunity. Its EV/EBITDA of 13.72 is below its 10-year median of 17.33 and far beneath the 21.68 peak in 2021. Meanwhile, its P/E ratio of 19.8 lags behind peers like Microsoft (26.3) and Amazon (42.1), despite Alphabet's superior free cash flow ($18.95 billion in Q1 alone).

The company's AI investments—like the $32 billion acquisition of cybersecurity firm Wiz and its Ironwood TPU infrastructure—are already paying off. Google Cloud's 28% revenue growth to $12.26 billion in Q1 underscores its shift from a “cost center” to a profit engine, with margins doubling to 17.8%. Add in 1.5 billion monthly users of AI-powered Search features, and Alphabet's moat is widening, not shrinking.

The Contrarian Call: Buy Now While the Market Sleeps

The market's focus on near-term risks—regulatory hurdles, ad revenue headwinds, or macro uncertainty—is myopic. Alphabet's $74.88 billion trailing free cash flow, dividend hikes, and $70 billion buyback authorization signal confidence. For investors, this is a rare chance to buy a $2 trillion tech titan at a discount to its growth peers.

The Weitz Multi-Cap Equity Fund's moves—adding to Alphabet while others retreat—mirror this calculus. If value investors are doubling down on a stock with unmatched data assets, AI leadership, and a fortress balance sheet, it's time to follow.

Historically, when Alphabet's revenue has surpassed estimates by at least 10%, investors who bought on the announcement date and held for 30 days have seen an average return of 51.84%. While this strategy carried a maximum drawdown risk of 21.79%, the strong average returns suggest such events have been powerful catalysts for growth.

Act now. Alphabet's fundamentals are firing on all cylinders, and the market's shortsightedness is your advantage.