In Focus: Amazon, A Gift From Wall Street
Last year Apple's (AAPL) stock price started its epic run from $240 per share to over $500 per share before doing a 4-to-1 split. Nothing could contain Wall Street's excitement and anticipation of the iPhone with 5G.
On Thursday Apple released its most recent quarterly results, which did not blow Wall Street away. Apple's iPhone sales for the quarter came in at $26.4 billion, which was below the $27.7 billion consensus. Slowing iPhone sales in China caused Wall Street to panic and hit the sell button on Apple, sending the stock price down over 5.5% on Friday.
This sell off and Wall Street's exit from Apple would be funny if these big firms didn't have such a large influence over the public's money.
For a year Wall Street has used the storyline of the 5G iPhone as a reason to buy Apple, and with one mediocre quarter Wall Street is ready to sell, even though the quarter Apple recently reported on did not include the company's 5G iPhone.
Apple's iPhone 12 with 5G technology was only recently released, and will be included in the company's next quarterly earnings call.
Maybe the selling in Apple's stock occurred because Wall Street realized buying Apple based on the iPhone 12 and 5G technology was always a weak story and it only got weaker when the pandemic hit.
The Most Valuable Company in the World
But the company I want to bring in focus today isn't Apple, it's the real most valuable company in the world, Amazon (AMZN).
Amazon also reported it's quarterly earnings on Thursday and beat revenue and net income expectations, but the stock also sold off on Friday because of Wall Street's concern over slowing growth in Amazon's AWS service.
The revenue for AWS came in at $11.6 billion just in line with consensus estimates, but free cash flow and operating income were up year-over-year and beat Wall Street estimates. Still Wall Street hit sell on Amazon.
I often wonder how clients of big Wall Street firms make money with all of the unnecessary buying, selling, and the commissions that are charged for each transaction.
It's Simple, Invest By Looking Around
My brother lives in a middle class neighborhood in Orland, Florida. His home is close enough to Disney that you can see the Disney World fireworks show if you sit on the roof of the house at night. In my brother's neighborhood cul-de-sac made up of around 70 houses, I see the Amazon van at least two times a day, every day. My morning runs on Tuesday are greeted by empty Amazon boxes in front of homes waiting to be picked up by the recycling truck.
I don't imagine this is any different from other parts of the United States, and probably even more so in the neighborhoods of the affluent. Not everyone has an iPhone, not everyone has a MacBook, not everyone uses Clorox, or Energizer batteries, but it seems like everyone buys something from Amazon, so how could this not be the most valuable company in the world?
I've only touched on the retail aspect of the company, AWS is a giant within the cloud industry and has Netflix, Facebook, ESPN, and the NFL among its long list of clients big and small. A large portion of Amazon's stock gains over the past two years had a lot to do with how successful AWS has been, but it appears Wall Street movers and shakers are ready to bail off of one ehhh quarter.
Don't Be Wall Street, Be Better
Investors should use Wall Street's need to move money to generate excitement and commissions against them and buy any dip they can in Amazon.
"...All of our senior executives operate the same way that I do, they work in the future, they live in the future, none of the people who report to me should really be focused on the current quarter" - Jeff Bezos - The David Rubenstein Show
Bezos' quote from his interview with David Rubenstein represents a long-term mindset, which Wall Street firms have a hard time practicing. Wall Street, to the detriment of its client's accounts, lives, breathes, eats, sleeps, and invests based on the coming quarter, because, you know, they've gotta generate those commissions.
The Next Berkshire Hathaway
What I see in Amazon is the next Berkshire Hathaway (BRK.A), Jeff Bezos is operating on a different level than other CEOs. His ability to see the future is spooky. He went all in on selling books online and helped usher in e-commerce, which is still growing. He built out AWS for 15 years behind the scenes before launching the service; what other CEOs were thinking about cloud computing back then?
Last week I discussed video games and Alexandria Ocasio-Cortez's highly viewed gaming stream on Twitch. Amazon bought Twitch in 2014 for under $1 billion dollars and has turned it into the premier site for game streaming. What Warren Buffett built with Berkshire, the highly valued collection of companies big and small operating under one major umbrella is what Bezos is doing. Amazon retail, Prime, Twitch, Alexa, the Fire product line, and AWS, are just the start.
I have no knowledge of what Amazon is working on now, but I'm sure they're working on something that will add value to the company, it's just their way.
Amazon is the most valuable company in the world, the markets just haven't realized it yet. The stock price is up there, $3,036.15 per share as of this writing, but don't let that scare you away, get some if you can on this dip. If Wall Street wants to sell it now, then buy it cheap, and sell it back to them later at a much higher price.
I day traded in and out of Amazon back in 2014, 2015, and 2016, when the stock was under $600 per share. One of my great regrets is not holding on to more of the stock for the long term. I think six years from now we'll be looking at a $6,000 per share stock price for Amazon and $3,036 per share will feel like the bargain of the century.