Amazon.com, Inc. (AMZN)

Ali Baba (BABA-N) or Amazon (AMZN-Q)? Both are online retailers. As a value investor, it is very difficult for her to own either. If she had to choose one, it would be this because they have the Cloud service business, which is very profitable. That sector is growing very fast and the penetration rate is quite low. Their retail side generates very, very low operating margins, but it is being more than offset by their web service offering. Growing very, very quickly and are investing. They are really focused on generating profits, but are reinvesting in their business.

Amazon (AMZN-Q) or Ali Baba (BABA-N)? He would add to both of these now, for 3 reasons. #1 the pullback. #2 it is a longer-term great story and #3 you have an $.80 Cdn$, which you don’t see very often.

The problem is how to value this. It’s not cheap on any metric that you can come up with. A company he would love to own. If he saw a serious material pullback, he’d be all over it. At this type of valuation, it is impossible for him to buy the name. He would recommend you look at other technology names that are trading at much more reasonable valuations.

AMZN-Q vs. BABA-Q. He likes them both. It is always better to buy them in a correction. But they both look like they could go higher. He suggests making a partial buy now. BABA-N looks exceptionally good because it is centric on Asia. BABA-N also gives you a Paypal equivalent. AMZN-Q is mostly North America.

Preeminent growth stock. Solid price momentum, but it came off a little bit recently. It is very expensive. 50 times cash flow and a low ROE of 10 times. 240 times trailing price earnings. These stocks can have fairly substantial corrections.

It is a large portion of the index so there is a lot of ETF trading. The price is hard to value. Sometimes they have earnings and sometimes they don’t. Alibaba has the backing of the government of China and so he prefers this. It has a much better chance than AMZN-Q in expanding into India. If you want AMZN-Q then buy it in portions and watch Alibaba.

People believe this is going to kill all of retail. They do not yet make a profit. They make amazing sales, but don’t worry about making profits. There was a time when people thought Wal-Mart would take over the world and drive other retailers out of business. Retailers learned how to deal with and compete with Wal-Mart. They adapted their operations. He believes the same thing will happen with AMZN-Q. It will not go away, but not take everything over either.

A bit of a tough analytical exercise. CEO truly marches to his own beat and doesn’t care what Wall Street analysts think about his results, and doesn’t view the calendar as some sort of reason to start or end. In many cases, corporate America has fallen prey to the short-term, myopic view of success, quarter to quarter to quarter. Business isn’t built that way. However, it is very difficult to understand or predict in what direction he is going. Cash flow is growing dramatically. Earnings are all over the place. Capital expenditures are skyrocketing. He would prefer Facebook (FB-Q) instead.

As a replacement for 30% of bonds and RIFs for retirees? Doesn’t think this is the right fit for a RIF or as a replacement for bonds. It doesn’t pay a dividend. It will be significantly more volatile than quality bonds will. He doesn’t own this because it doesn’t pay a dividend.

A very important company and very attractively valued. It isn’t just that they have the dominant position in internet retail and a powerful brand, it is also that they own a lot of the technology that facilitates this. A low-cost producer. What a lot of people miss is that their accounting is very conservative. Their free cash flow is between 4% and 5%, very similar to the market. However, it can be volatile. Every 18-24 months there appears to be a 20% pullback. That would make the easiest entry point.

The longer-term trend for this is distinctly on the upside. The problem is that, like most of the FANG stocks, it is starting to struggle now. That is not unusual, because they have had such a huge run. Technically, it is in an upward trend, but is overbought and is starting to show some early signs of rolling over. From a trading point of view, you want to take some money off the table. Seasonally, this has done best from late October through until January.

Broadcom (AVGO-Q), Nvidia (NVDA-Q) or Amazon (AMZN-Q) for a long-term hold? He likes all of them. They are all very interesting companies. We all know the story of Amazon, and Nvidia is on fire with their new graphic chips. Broadcom has been doing a great job of consolidating the traditional computer chip industry. This one would be in the middle of the risk curve. You are paying a big price for it, but growth is pretty certain and the outlook is long-term.

Seasonality for technology stocks usually starts on October 10. This just came out with earnings and the stock pulled back a little. We are starting to see some weakness overall in tech stocks. This could actually pull back to $875 if there is some weakness in the market and the technology sector.

AMZN-Q vs. QQQ-Q. You can buy very few AMZN-Q shares if you want. There are huge earnings coming in from the technology sector and they report next week. The QQQ-Q’s seasonality reaches its peak on July 17^th (today). These stocks are overbought right now. The stocks are starting to struggle. We have already seen the peak in QQQ-Q.

Long-term hold? P/E ratio 180, which really takes you back. However, if you adjust the accounting Net Income to strip out the non-cash items, the cash P/E ratio is in the high 20s-30s. If looking to hold this for at least 3 years, it is a tremendous company.