It's not often anyone gets to outdo the legendary Warren Buffett at investing.
After all, Buffett has an unrivalled six-decade investing career, which he has used to build his company Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B) from relative obscurity to the US$693 billion behemoth it is today. Giving himself a net worth of US$110 billion in the process, of course.
Yet, like all of us, Buffett is only human. As such, he does make mistakes from time to time. I'm sure one of his biggest mistakes was passing up on Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) stock. Alphabet is the US tech giant that owns Google.
It is one of the most successful companies of all time, giving investors a 3,270% return since its 2004 IPO (that's 17.2% per annum compounded).
Yet neither Buffett nor Berkshire owns this company. Nor has Buffett or Berkshire ever owned it.
Image source: Getty Images
Buffett never bought Alphabet stock. Should we?
Alphabet's Google is one of the most dominant companies on the planet. It has near-total dominance in the global search engine business, only ceding ground where it has been completely barred from participating in a market, as has happened with China.
But Google also dominates in other areas too. It owns the Android smartphone operating system, which is by far the most used system globally. Other Alphabet apps like Google Maps, Translate, and YouTube are also among the world's most popular.
Quite simply, Alphabet has one of the widest and deepest moats of any company anywhere. And yet Buffett, who coined the term 'moat' himself, has never owned it.
To be fair, some aspects of Alphabet's business would be hard for a nonagenarian to get their head around. And Buffett has come out before and waxed lyrical about his love of the company and regret in not buying it:
But even though Buffett has never bitten the bullet on Alphabet, that doesn't mean we can't. And right now might be the perfect time to consider an investment.
Be greedy when others are fearful
Alphabet stock has had a pretty shocking year. In early 2022, Alphabet's Class A stock hit a high of US$151.55. Today, it is going for just US$91.29, a fall of almost 40%:
This leaves the company on a pretty compelling valuation, in my view. One that hasn't happened for Alphabet in a decade.
At present, Alphabet's Class A stock has a price-to-earnings (P/E) ratio of 18.48. That means investors are being asked to pay $18.48 for every $1 of earnings.
By comparison, the ASX's Commonwealth Bank of Australia (ASX: CBA) has a P/E ratio of 19.7 right now. Woolworths Group Ltd (ASX: WOW) is sitting at a P/E ratio of 26.88.
Yes, by this metric, CBA and Woolies shares are more expensive than Alphabet stock. I know which company I would rather own for the next decade and beyond! So perhaps now is the time to do what Buffett did not, and buy Alphabet shares.
