Warren Buffett has had a profound impact on the investment landscape, due largely to his long-running success. His principles and perspectives have and will continue to shape the industry.

Bill Ackman, billionaire hedge fund manager of Pershing Square Capital Management, is one such professional who follows the Oracle of Omaha's philosophies. He adopts a value-focused, concentrated investment strategy, identifying great businesses to own for the long haul.

The average investor might want to pay attention to this portfolio manager's moves, thanks to Ackman's impressive track record since Pershing Square's inception in 2004. In fact, there's one company that makes up nearly 19% of the $10 billion in assets.

I'm talking about Alphabet (GOOG 0.61%) (GOOGL 0.53%). Read on to learn what Bill Ackman appreciates about this business. Investors who are considering buying the stock can then view things with a fresh perspective.

Alphabet is a fantastic business

Alphabet has been in the Pershing Square portfolio for about a year, but that hasn't prevented it from becoming such a sizable holding. In his firm's June 2023 investor letter, Ackman described Google as "one of the world's greatest businesses." I tend to agree with this statement.

Let's start with Google Search, the company's crown jewel segment that commands 91% of the worldwide search market. Besides having a monopoly position, it has extremely high barriers to entry that make it virtually impossible for a newcomer to successfully launch a competing product. And given its tremendous scale, Search benefits from powerful network effects.

YouTube is another Alphabet service that has network effects. The video streaming platform and search engine have made this business a digital advertising powerhouse.

Ackman is confident that spending will continue to shift from offline methods to digitally native avenues. And this provides a tailwind with which Alphabet can ride to growing revenue over time.

The transition from on-premises IT spending to off-premises has propelled Google Cloud into becoming the third-biggest cloud services provider in the industry. This segment posted 25% revenue growth in 2023, and it is now consistently profitable from an operating income perspective.

We can't ignore Alphabet's pristine finances. The billionaire hedge fund manager raved about the company's strong balance sheet, which carries $111 billion of cash, cash equivalents, and marketable securities, compared to just $13 billion in debt. And by producing so much free cash flow, Alphabet can repurchase huge amounts of its shares.

Focused on artificial intelligence

Ackman added Alphabet to the Pershing Square portfolio in the first quarter of 2023. At that time, there were huge fears about the business falling behind in the artificial intelligence (AI) wars. With the benefit of hindsight, these worries were overblown. There might be no company better positioned than Alphabet to harness the power of this technology.

Since as far back as 2001, Alphabet has been using AI and machine learning within Search. And AI is already a key tool within other popular products, like Maps, Gmail, and YouTube, with plans to introduce even more features to better serve users.

The management team has a huge advantage because the business possesses virtually unlimited financial resources, as well as elite tech talent and know-how, to be at the forefront of the AI revolution. In 2016, CEO Sundar Pichai pivoted Alphabet's strategy to be AI-first.

What about Alphabet's valuation?

Alphabet shares traded at a forward price-to-earnings (P/E) ratio of just 16 when Ackman first started purchasing the stock. That looked to be a smart use of capital. In the past year, shares have moved 49% higher (as of April 23).

Even so, I think the valuation right now is compelling. At a forward P/E multiple of 23.2, Alphabet still looks like a no-brainer buying opportunity.