Why Alphabet Stock Is Still Undervalued in an Expensive US Market

Each month, our I’m a fund manager series puts a leading fund or investment manager in the spotlight to explore how they handle their own finances.

We ask where they would invest over the next year and the coming decade, as well as which risks investors should avoid. We also discuss gold, bitcoin and whether a stock market crash could be on the horizon.

This month, we spoke with Miguel Oleaga, portfolio manager of the Thornburg Global Opportunities fund.

The $1.9billion fund invests globally, with 32 per cent of its portfolio allocated to the US, 25 per cent to the Eurozone and a comparable share invested across Asia.

Among its biggest holdings are Samsung Electronics Co Ltd, Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Alphabet Inc.

The fund has delivered a 15 per cent return to investors so far this year, while its average annual return since launching more than 20 years ago stands at 11.68 per cent. That performance has surpassed its benchmark, the MSCI ACWI Index.

If you could invest in only one company for the next ten years, what would it be?

Miguel Oleaga replies: Alphabet. The company brings together many of the qualities we seek: a powerful competitive position, several avenues for earnings growth, significant financial resources and exposure to major long-term trends in technology and artificial intelligence.

What makes Alphabet especially appealing is that, unlike many businesses linked to AI, we do not believe its valuation fully captures the scale and lasting potential of its earnings opportunities.

What about for the next 12 months? 

TSMC. It is hard to identify a company with a stronger role in the global semiconductor industry, and demand from AI and other forms of advanced computing remains substantial.

Crucially, we are investing in a high-quality business whose growth prospects still look attractive when compared with its valuation.

TSMC was also one of the fund’s contributors during the most recent period.

Which company has delivered your best investment returns for the fund?

I would answer this in terms of semiconductors rather than a single stock, because TSMC and Samsung Electronics have both been important contributors. 

We backed them because they are exceptionally well positioned in a critical part of the global technology supply chain, but also because we were able to buy them at valuations that we believed did not fully reflect their long-term earnings potential. 

That combination of structural growth and reasonable valuation is central to how we invest.

When will the next big market crash happen and are you ready for it?

It is difficult to estimate when markets will correct, much less crash. But there are signs to watch for – a market in which the margin of safety and the risk/reward on offer have become unfavorable, typically through a combination of high valuations and high expectations. 

It would be fair to say that we see that combination in US equities, and we are underweight the US relative to our benchmark as a result.

We are certainly conscious of the risk that expectations around AI become excessive, but our thesis is not dependent on assuming that every dollar of AI investment will generate attractive returns. 

The portfolio’s weighted-average 2026 price-to-earnings ratio (P/E) is 12.9x v 18.8x for the MSCI ACWI, so we’re trying to participate in AI growth without paying the market’s highest prices for it. 

Should all investors be looking to rebalance their portfolios away from the US?

I wouldn’t frame it as moving away from the US so much as recognizing that investors have an increasingly broad global opportunity set. 

The US remains home to many exceptional companies, but valuation differences across markets are significant, and we’re finding compelling opportunities in Europe and Asia that don’t necessarily receive the same attention. 

Our portfolio reflects that: only about one-third is invested in US equities, with substantial exposure to Europe, South Korea, Taiwan and other markets.

Should investors be adding gold to their portfolio?

We don’t invest in gold directly, so it would be hard for us to pontificate on its merits today. The broader point is that gold can provide a level of durability in client portfolios. 

In our approach, we believe that buying market-leading businesses with strong competitive positions and opportunities to reinvest, at attractive valuations, provides a similar benefit. That is evident in our downside capture of 79 per cent during the last five years.

Do you personally invest in bitcoin or other crypto currencies?

We do not – it is simply not an area of focus for us. Outside of our clients’ capital, our time is our most valuable asset, and it cannot be recovered once spent. 

We allocate our time to where our investment process has proven to add value via security selection. We have yet to identify a framework we can apply consistently in the crypto space.

Which sector most excites you?

Technology, particularly the infrastructure supporting AI and advanced computing. 

But we’re more interested in identifying the companies that enable these trends than simply buying the most obvious AI names. 

We want to own businesses with durable competitive advantages and strong underlying growth, but where the share price still offers an attractive entry point. 

The portfolio’s technology exposure has increased as we’ve found those opportunities.

What country offers best value?

South Korea is one of the markets we find particularly interesting. It offers exposure to world-class technology and semiconductor companies, but valuations can still be considerably more attractive than those of comparable businesses in the US 

Samsung Electronics is a good example: it gives us exposure to long-term growth in semiconductors and AI while still fitting our discipline around valuation. 

As of June 30, South Korea represented about 7.5 per cent of the portfolio, with Samsung its largest holding.

Why should investors choose your funds over a passive index fund?

An index gives you the market; our objective is to identify where we think the market is mispricing individual businesses. 

Today, the portfolio trades at roughly 12.9 times estimated earnings v 18.8 times for the MSCI ACWI, while the companies we own have been growing revenues notably faster than the index. 

Over the trailing 12 months through June, the fund returned 29.49 per cent v 23.67 per cent for the MSCI ACWI, although of course we don’t expect that degree of outperformance every year.

Is property still a safe haven for investors?

We do not invest in property directly, but we have held housing and real-estate-related shares, and we have been reducing that exposure in recent times. 

Real estate is sensitive to affordability, and we view current interest rate trends, coupled with demographics, as generally unfavorable.

You inherit £100k tomorrow as a 25-year-old without any assets. How would you invest?

Global equities – compounding is a magical thing. Buying good businesses at good prices, with the benefit of a long investment horizon, can create attractive value over time. 

Global markets rarely move in lock step with one another, which creates pockets of mispricing, and a global mandate allows investors to go wherever those opportunities exist.