We recently published a list of 10 Cheap Blue Chip Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against other cheap blue chip stocks to buy according to hedge funds.
The broad-based market anxiety increased as the US policy uncertainty rose, says Fidelity. The financial markets were weighed down by tariff hikes, deregulation, and tighter immigration policies. The global business cycle is now less synchronized. As per the investment management firm, the US seemed to show mid- and late-cycle dynamics in Q1 2025. Furthermore, the diversification across fixed income and non-US assets is of utmost importance amid growth risks. While the gold and commodities gained, the US dollar decline fueled the non-US equities, says Fidelity.
Amidst US Policy Uncertainty, Diversification Remains Critical
As per Fidelity, the uncertainty regarding the direction of US policy impacted the financial markets during Q1, with investors digesting the news related to executive actions, such as tariff increases, deregulation announcements, reduced government staffing and programs, and tougher immigration activities. Also, the worries related to the economic effects of the tariff increases on the global economy saw an increase during the days after the quarter closed. Despite elevated growth risks, the global expansion was intact as of the close of Q1. Fidelity opines that diversification in fixed income assets and non-US assets is essential.
As per the investment manager, the S&P 500 Index delivered a return of −4.3% for Q1 2025, partly because of the performance of growth stocks (−10%). On the other hand, gold (+19%) and commodities (+8.9%) saw robust gains amid higher market uncertainty.
According to Fidelity, the consumer inflation remained rangebound at ~3% during Q1, which was well above the 2% target of the US Fed. The firm anticipates sticky inflation around 3% for the next year, with upside risk resulting from tariff increases. As per the firm, the consumer inflation expectations have increased to multi-decade highs, making it simpler for businesses to pass the increased costs. Coming to the labor, it has remained tight so far, despite increased policy uncertainty, government layoffs, and federal funding cuts, says Fidelity. On the supply side, the broader labor force participation has stalled below the pre-pandemic rate due to slowing immigration as well as demographic constraints.
As per Marci McGregor, Head of Portfolio Strategy (Chief Investment Office), Merrill and Bank of America Private Bank, the next few months can be a good time to play defense. The investors can consider defensive, dividend-paying, and value-oriented stocks. For the long term, the investors can position themselves for when the uncertainty around trade decreases. The volatility can provide a chance to buy assets supporting the long-term strategy at attractive prices, says McGregor.
Our Methodology
To list the 10 Cheap Blue Chip Stocks to Buy According to Hedge Funds, we scanned the holdings of the iShares Core S&P 500 ETF and chose companies that trade at a forward P/E of less than ~20.0x. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024. Finally, the stocks were arranged in ascending order of their hedge fund sentiments.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Alphabet Inc. (GOOGL) the Cheap Blue Chip Stock to Buy According to Hedge Funds?
A user's hands typing a search query into a Google Search box, emphasizing the company's search capabilities.
BofA Securities maintained a “Buy” rating on Alphabet Inc. (NASDAQ:GOOGL)’s stock. The analysts are positive about Google’s recent AI Overviews and its core valuation. They opine that new features are expected to result in increased monetization and more advertising clicks from informational queries. Alphabet Inc. (NASDAQ:GOOGL)’s core search business has been demonstrating resilience and growth. Despite the worries related to the AI disruption, the company’s traditional search business is robust. The company’s AI initiatives go beyond its cloud services. The integration of AI throughout the company’s product suite exhibits its commitment to maintaining a competitive edge in AI technology.
Alphabet Inc. (NASDAQ:GOOGL)’s future growth remains tied to the AI initiatives and the AI integration. Its AI infrastructure investments and research place it well to reap the benefits of elevated demand for AI-powered services and cloud computing. AI advancements can fuel Alphabet Inc. (NASDAQ:GOOGL)’s search algorithms, which can help maintain dominance in the search market and potentially increase ad revenue with the help of more precise targeting and improved user experience. Also, GCP’s emphasis on AI and ML capabilities can bring enterprises that are planning to implement advanced AI solutions, potentially fueling market share gains in the broader cloud sector. As Alphabet Inc. (NASDAQ:GOOGL) has been advancing its AI technologies, GCP can benefit from its early access to cutting-edge AI capabilities.
Overall, GOOGL ranks 1st on our list of cheap blue chip stocks to buy according to hedge funds. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
