Amazon.com, Inc. (AMZN)

[Amazon makes up 25% of the S&P]: These stocks have a successful track record for a period, but it comes down to valuation. Amazon barely makes a profit if it does at all. Their game is market share at any cost. Eventually, if you can't make any money, what are you doing there?

He thinks it is easy for them to gain market share when you are not making any money. At some point governments will intervene to bust this company up as it is becoming dominate in too many spaces. At some point smart retailers will find ways to differentiate themselves to battle back against the company.

It is richly valued and it is difficult to model the downside of momentum stocks like this one. The company’s web services business provides a basis for estimating the value and risk of the company but does not represent enough of the total business. She will not buy it because it does not fit in with her investment approach.

Fabulous company, but is it a fabulous stock? He still can't accept the stock price. You're paying a lot of money based just on cash flow. Can Amazon continue to grow and dominate at this rate? Okay, they are good at what they do. He doesn't own it. Doesn't like the valuation.

Alibaba (BABA-N) or Amazon (AMZN-Q)? You can buy both and he would. Don't use multiples to under valuations, but rather look at invested capital. Estimates 15-20% return on invested capital for Amazon. Alibaba is equal if not slightly better than Amazon. 18% ROIC. Loves both, but would slightly prefer Alibaba.

Amazon (AMZN-Q) or Netflix (NFLX-Q)? Doesn't own either. Prefers Disney (DIS-N) as their pending purchase of 21st-Century Fox is going to remove the shackles and people are going to stop thinking of it as a cord cutting situation with lower subscriber participation, but more in terms of a streaming competitor to these 2. (See Top Picks.)

It's very tough to own this if you don't own it already. It’s such an incredible company. What they are doing with the Cloud is really incredible.

(A Top Pick June 20/17. Up 18%.) This is on quite a roll. Their business is expanding and will continue to do so massively for the next several years. The issue is profitability. They are throwing all their cash flow back into growing the business. When they slow down, the earnings will come roaring through.

Technically it has had a huge gain and just went to an all-time high. There is no indication of it even reaching a peak. Seasonally, stocks like this usually do very well from about mid-October through to the end of the year.

It is a disruptor. The valuation of this stock is based on its disruptive effect. He prefers BABA-N as you have a better opportunity for equity growth. We in North America are transitioning from stores to ecommerce. In China they are transitioning from no shopping centers to ecommerce.

It’s not too late to get into this. As long as we are in a decent market and as long as this continues to beat estimates, it should continue to participate. The leader in a Bull market tends to be a leader to the very end. You are likely to see the weaklings roll over first. Right now, breadth is expanding and weaklings are not rolling over. Stay in the leading stock as they have a tremendous advantage.

What is the potential for a stock split? She doesn't know of any plans, but companies want it to be a reasonable number so there can continue to be a retail base in the stock. The market is giving this company a lot of credit. One analyst was quoted that the rules of valuation do not apply to this company. When you hear that, you wonder how much sentiment is driving the stock. To be fair, they have done a better job of generating cash flow in the last little while. However, they have a history of spending more than they make. Right now, the market is very accommodating to them. She is not participating in this stock.

Has been wrong on this for about the last 10 years. As a value investor, it is hard for him to buy into a stock like this. He doesn’t chase growth. This stock barely makes any money, and yet it continues to go up from a valuation standpoint. He would rather wait for a better entry point.

Everyone is afraid of them. Reinvested capital back into the business is starting to show rewards. He would buy it on dips. You do not need to chase these stocks. After thanksgiving we will have the cyclicality of money flows into the market. Any correction prior to that could be in the 5% range and then we might be set up for something more substantial.

Hold or Sell?If you are holding it, you are buying it. There is no question there is a tremendous amount of growth ahead. It’s very hard to justify valuation. While he has confidence that e-commerce penetration is going to increase very gradually from 9%-10% in the US, when you look at their valuation it is difficult to justify how much earnings are going to have to grow for the valuation to come down to a market multiple. Trades at about 110X next year’s earnings. If you take that market multiple and bring it down to a multiple of about 20, that implies earnings are going to have to grow at a compound annual growth rate of 48% over 10 years. Very few companies have been able to do that.