Amazon.com, Inc. (AMZN)

There is an oligopoly forming up in Cloud services business with Google (GOOGL-Q), Microsoft (MSFT-Q) and Amazon. He likes what is happening. Amazon recently put up a quarter which was a 6%-8% beat. The company is in the right space and doing the right things, but valuation is really stretched. He would like this to have a little bit of time for consolidation.

He would be more of a buyer than a seller on this. They don’t make any money, but the revenue stream is so powerful that at any point in time they could just say we are going to make a lot of money, because the margins are pretty good.

It is hard to see this not being in a portfolio. Online retail is only 11% of total retail. Think of other industries such as travel, which is now 45% online, there is huge room to grow in online retail. They account for 20% of all US online retail, and that’s only going to grow. Not only the leader in retail, but they are into Cloud services, which is where the world is going. They are doing everything right and hitting on all cylinders. (Analysts’ price target is $1100.)

AAPL-Q vs. GOOGL-Q vs. AMZN-Q. He likes these two as well as AMZN-Q. You could make a case for all three. He owns all three. These guys are changing the world. AAPL has not had an announcement for a while, but will have announcements in the next year. They could pull back a bit, but he would own all three.

The classic category killer. In his funds, he is Long this company and Short the things that Amazon is killing, certain retailers, etc. Not a cheap stock at 28X enterprise value to EBITDA. It certainly has a lot of runway in front of it. They are getting involved in every vertical with respect to retailing. He is nervous.

Wait for a pullback. It has just gone over $1000. What usually happens with round numbers is that it stays there for some time, or it corrects back.

This is such an amazing juggernaut that he doesn’t know how you could value it. It doesn’t make any money, but seems to consume everything in its path, and dominates everything it touches. This is not what he would call a value stock, and in the general market correction, it would get beaten up. As long as it doesn’t get that, he thinks you are going to be okay.

He sees it continuing to get stronger and to dominate the market. The problem with the stock is that it is not very profitable, based on the numbers. It has a price based on anticipation of greater earnings. He finds the valuation too difficult to stomach.

He has mixed feelings on this. Valuation is quite high at 66X forward earnings, but it is still showing a 35% long-term growth rate. PEG ratio is about 1.9-2X, a little more expensive than what he likes. They are doing very well and dominating the North American online retail space. What is interesting is Amazon Web Services whose revenues are doing very well and accelerating. However, they could face some competition from very well capitalized players such as Alphabet (GOOG-Q) and Microsoft (MSFT-Q) down the road. Valuations are slightly above where he would like them to be.

They are definitely the disruptor. They are a wonderful company, but they are extremely expensive.

This is a tough one. They broke to a new high today on above average volume. This is a buy signal for him. It is hard to put a value on them. They benefit from the network effect. They are changing the landscape of retail.

The valuation is a bit rich. He looks at it every time it pulls back. The most interesting part of the story is the disruption they are creating. They have huge runway and huge advantages. Home renovation is a space that is relatively safe from AMZN-Q. He prefers to play AMZN-Q through the suppliers of equipment for warehouses.

Amazon (AMZN-Q), Shopify (SHOP-N)? Both are trading at high valuations. Shopify is not quite making money, while Amazon is making a small profit margin, but not much. This one is growing its top line in the low 20% range, and Shopify has 80% revenue growth. If he has 2 companies that are both overpriced, he is going to go with the one that is 80% versus the one that is growing 20%, so he would go with Shopify.

A very interesting company. Trades at a ridiculous multiple so there are a lot of expectations in the stock. They are growing their AWS cloud business exponentially and their retail business is the core retail business in the world. It is hard for so many other retailers to complete with them. They need to create the revenue. You have to expect a lot of volatility if you own this thing.

The proverbial story of valuation versus fundamentals. This is really a killer in its categories of online retailing and Cloud services. However, it is not cheap. You are looking at 25 to 28 times cash flow. They have a fair bit of growth to achieve in the next little while to come into that valuation. He would prefer looking at this in 2 parts, online retailing and Cloud services, so would suggest maybe looking at Microsoft, which has been growing its share in Cloud services. A cheaper stock and pays a dividend.