Mohnish Pabrai's Insights on Meta, Alphabet, Microsoft, and Apple

Fund manager and renowned Buffett and Munger disciple Mohnish Pabrai recently gave an insightful and fun session at The 2024 SumZero Virtual Investor Summit.

It's well worth the one-hour watch time, but if you only have a few minutes, here’s a full breakdown of everything he covered:

The State of Big Tech - Meta, Alphabet, Microsoft, and Apple

• The last time Mohnish talked to SumZero, he predicted Meta would be an "easy double" at $200. But it wasn't easy to hold through.

• CEO Mark Zuckerberg righted the ship by cutting costs, implementing layoffs, and controlling R&D spending at their Reality Labs division. The stock fell to $88 before coming full circle to over $500.

• In Pabrai’s opinion, Alphabet has a lot of fat to cut in terms of expenses.

• Microsoft is much leaner, with 36% net margins vs. Alphabet’s 24%.  Furthermore, Microsoft is a “very critical” vendor to enterprises. Its strong subscription revenue isn’t going anywhere and is, therefore, of higher quality than Meta or Alphabet. Earnings stability demands a premium. 

• Meta and Alphabet are still incredible businesses and continue to eliminate ad spend waste for businesses.

• The metaverse narrative is over; now, it’s all about AI. Microsoft is an exceptional cloner but not a great innovator. Ironically, they are now the leader in AI, especially with their partnership with OpenAI.

• Microsoft has exceptional execution once it decides to clone or pursue an opportunity. It’s approaching 50 years old and can move effectively from paradigm to paradigm. It is extremely capable of adapting to change. 

• Google has long been strong in AI but lacks Microsoft's execution. Bill Gates said that Microsoft does real research in the academic “ivory tower” and practical R&D lab styles.

• Google has had a leg up on pure academic research for a long time, but it’s fallen behind on business execution.

• Apple has little to no pure research; it’s all practical R&D.

• Pabrai expects all four big tech giants to continue performing on the business front, but none of their stocks are cheap now.

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