We think a phenomenon some investors refer to as “pattern recognition” is largely responsible for the strong performance of the shares of Alphabet Inc. (GOOGL, Financial), up 43% in 2015. During the third quarter, the company, still commonly referred to as Google, announced a change in the corporate structure and the creation of a “holdco,” named Alphabet, which would hold Google’s core search engine business and separate out their newer, less mature endeavors such as Google Fiber, Artificial Intelligence, Calico (Google’s foray into longevity), and others. Google veteran Sundar Pichai has become the CEO of Google Inc., a subsidiary of Alphabet, allowing Google’s co-founders Larry Page and Sergey Brin to spend more time on Alphabet’s other businesses. We continue to believe that Google is one of the most innovative companies on Earth, with a powerful business model that benefits from the network effect, and the greatest collection of human talent in any one place in the world. Data is becoming increasingly more important and they own more data than any other company we know. We think the value of that data and its monetization opportunities will become more apparent over time.
From Baron Funds' Global Advantage Fund letter for the fourth quarter 2015.
