Alphabet (GOOG, Financial) detracted (like most of our technology holdings) during the quarter and during the year. Alphabet grew its core search revenues high single digits (foreign exchange adjusted) on a staggering +71% year ago comparison. Despite this stellar top-line performance, shares continued to sell off as the market discounted fears of an advertising recession. Per our strategy’s discipline, our multiyear time horizon allows us to tolerate this exact kind of short-term volatility in growth rates. The past few years of heightened economic volatility has been unprecedented, so a "normalization" of end-market demand at Alphabet is not the end of the world. Alphabet's Cloud segment is generating revenue at a $25 billion run rate but is still running at a loss. This business is capable of generating much better margins in the future. In the meantime, the Company has a fortress balance sheet and has been repurchasing shares at attractive historical multiples.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners fourth-quarter 2022 letter.
