The Motley Fool·2026-02-23 03:30Core Viewpoint - Seth Klarman's investment strategy indicates a shift from Alphabet to Amazon, highlighting the perceived undervaluation of Amazon amidst market pessimism and strong growth potential in cloud computing and AI services [2][10][12]. Group 1: Alphabet (GOOG) - Klarman initially invested in Alphabet during the COVID-19 pandemic, drawn by its strong free cash flow and dominant market position [4]. - Despite trimming his stake, Klarman sold 41% of his remaining shares in Alphabet last quarter, capitalizing on a significant price increase as the stock's forward P/E ratio rose from around 20 to 30 [5][8]. - Alphabet's recent developments, including lenient antitrust remedies and growth in its core Search and cloud computing businesses, contributed to its stock price surge, making it a top-10 position in Baupost's portfolio [6][8]. Group 2: Amazon (AMZN) - Klarman invested nearly half a billion dollars in Amazon in the fourth quarter, making it the second-largest position in Baupost's portfolio at 9.3% [10]. - Amazon's stock only increased by 5% from the start of 2025, contrasting sharply with Alphabet's 65% rise, which may present a buying opportunity due to its attractive valuation [11][12]. - Amazon Web Services (AWS) showed a 24% year-over-year revenue growth, with expectations for strong earnings acceleration in 2027, despite significant capital expenditures planned for 2026 [14][15].