I initiated a new position last week in Amazon.com, Inc. (AMZN) at $1,657.24. It is our 8th largest position at this time.
Reason for current opportunity
The share price for Amazon has been under pressure because of a variety of threats:
Amazon has been on my watch list for a while as I currently sell various products on Amazon and use their advertising system to advertise products. I shop there, but not nearly as much as I used to. For the last year or so, I moved more of my shopping to Walmart (WMT) due to lower prices mainly. I usually buy from Amazon if I cannot find the product at Walmart.com. Although it seems that many that shop at Amazon don’t necessary care about the lowest price and it has been shown to be a favorite among Generation Z and Millennials.
While Amazon has been reluctant to monetize Amazon.com due to aggressive plans to acquire market share, they have been able to grow and monetize Amazon Web Services, which produces the majority of their profits.
What I’m most excited about is their ability to collect ad revenue from vendors that promote their products on Amazon.com. This is how Facebook and Google make most of their revenue and by relying more upon 3rd party sellers, Amazon doesn’t need to worry about cost of goods. They make money no matter what, more like Ebay’s (EBAY) business model.
It seems that over time many consumers are skipping searching on Google and going right to Amazon.com first to do product research and on the flip side, many brands are putting more effort on selling on Amazon over selling directly on their own websites. Some will create a website just to direct customers to make the purchase on Amazon.com. It’s seems that over time, more brands could push more of the sales to a few marketplaces such as Amazon.com, Walmart.com and Ebay.com along with some niche players such as Etsy.com making less of need for many of the other retailers currently out there. While I don’t believe Amazon will end up with all retail, I do think that over time, we will end up with a lot less retailers and few large marketplaces where most online sales and maybe bricks and mortar business is done. The struggles of Bon Ton, Sears, Kmart, Circuit City, Toys ‘R’ Us to name a few show this is the case.
Amazon currently trades at a:
The forward PE and Price/Book are higher than I like and I usually prefer companies that pay a dividend. However, they have a huge earning potential and I think that this will grow significantly at some point. They could keep their margins on retail low, but make significant amounts from ad revenue like Facebook and Google do. The current PEG of 1 is very attractive to me and is why I see the stock is a bargain at this time.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in AMZN. If the price should continue to drop, I will most likely add to this initial position.
I initiated a new position last week in Capital One Financial Corp (COF) at $86.01. It is our 11th largest position at this time.
Reason for current opportunity
The share price for Capital One alone with most financials seem to be under pressure with the broad market selloff which started partially due to increasing fed interest rates, which is odd when most banks due better with higher interest rates. However, with a credit card centric business such as Capital One, it doesn’t matter too much since the rates they charge are not directly related to the fed rate like some of our other banking holdings like Community Community Bancorp Vermont (CMTV) and Community Bank System, Inc. (CBU).
However, that being said, there are some threats to their business, which are:
Why Capital One?
Capital One has been on my watch list for a while since I replaced my Paypal debit card with a Capital One credit card. While the Capital One credit card charges an annual fee, which the Paypal card did not, the Capital One card pays 2% back on ALL purchases, and the reward payments are made monthly in cash. I get a lot more back even with the annual fee. I find their online system better than Paypal’s in that it the reports/exports are easier to understand and work with and customer service has been better in my opinion.
Some strengths I see in the business are:
I feel at the current stock price, it’s become an increasingly good value.
Capital One currently trades at a:
These numbers are significantly better than the industry average in every way.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in COF. If the price should continue to drop, I will most likely add to this initial position.
I added more to my position today in Facebook Inc (FB) at $157.73.
Now my 7th largest holding. I still think at this level, it’s a great opportunity.
The recent pullback again brings the price to lower than my previous purchases. I imagine this is due to recent issues with hacked accounts, more spending on security/privacy which will lower earnings in the short term and of course the data leak scandal. I believe the fears are overblown and this poses a good opportunity.
I mentioned in the my previous post/purchase that if the price should continue to drop, I would consider adding more and that I would be willing to double my then current position. That’s what I just did today. This purchase doubles my total holdings in Facebook.
I initiated a new position today in CVS Health Corp (CVS) at $61.84. It is our 10th largest position at this time.
Reason for current opportunity
CVS has been on my watch list for a while as it’s become an increasingly good value. Most people know CVS for their CVS Pharmacy retail stores. However, the company is looking to become much more. Through various acquisitions, they are morphing into a more complete healthcare services company that includes benefits management, health insurance, retail pharmacy stores and clinics. CVS purchased Caremark (prescription benefit management) and intends to purchase Aetna (managed health care/ health insurance). CVS also operates MinuteClinic (retail clinics).
This makes for a great opportunity for CVS to use it’s negotiating power and to increase efficiencies in order to provide lower cost healthcare products/services than their competitors as well providing a one-stop solution to customers.
CVS currently trades at a:
These numbers are significantly better than the industry average and the healthcare industry should continue to grow from here.
I believe the current stock price drop represents a great opportunity for those not currently invested or with a small position in CVS. If the price should continue to drop, I will most likely add to this initial position.
I added more to my position today in Facebook Inc (FB) at $160.32.
Now my 8th largest holding. I still think at this level, it’s a great opportunity.
The recent pullback again brings the price back to near my first purchase. I imagine this is due to the earnings release coming out later today and fears over the impact of the news feed changes and data leak scandal. I believe the fears are overblown and this poses a good opportunity.
As for the newsfeed changes. I feel that reducing page based content should help boost revenue/earnings in that pages will need to rely on paying to have their posts shown.
However, if they should have made an impact the price continues to drop, I will consider to add more at lower prices depending on the severity of the news and impact to the business. I would be willing to double my current position from here.