Amazon.com

Amazon.com, Inc. (AMZN) – Buy

I added to my position in Amazon.com, Inc. (AMZN) on 11/15/2019 at $1735.27. It is now our 2nd largest position at this time.

Most of the same reasons for my previous purchases still stand. Based on our own sales on Amazon.com and expectations for this holiday season, I expect the next report to be better than they expected. Of course there are risks to this such as Amazon’s increased re-investment in services, which I’m fine with if it makes the business stronger in the long run.

If the price continues to stay at this price or drops further I may add more to my position.

Amazon.com, Inc. (AMZN) and Community Bancorp (CMTV) – Buy

    

Once again, I added more to my positions today in Community Bancorp (CMTV) at 15.75 and Amazon.com, Inc. (AMZN) at $1753.13.

Amazon is now my 3rd largest holding and Community Bancorp is my 4th largest holding. Rankings for top holdings are located here.

COMMUNITY BANCORP

I continue to believe Community Bancorp is a safe income investment. It’s pulled back a bit more since my previous purchases, the but the business continues to grow. Revenue, income, equity, book value all consistently growing. The dividend yield is currently 4.8% is great! 

While I’ll don’t see any huge gain in value of the shares, it’s a great place to put some money to produce income while minimizing risk to national or international risk factors being that it’s a very small local bank here in northern Vermont.

Valuation

  • PE of 9.6
  • PEG of 1.01
  • Price/Book of 1.3
  • Dividend yield is 4.8%

AMAZON

This follows up my purchase from last week to build up the position further.

Amazon was under more pressure earlier after their quarterly results and guidance disappointed some. The company is switching back to investment mode and should be seen as a long term positive. One Day shipping is proving to be expensive but will provide them more of an advantage over competitors. Growth in ad sales is going very well and they can use that to offset increased shipping costs.

It’s expected to be another record holiday sales year for e-commerce and Amazon will benefit.

Here is my previous analysis on both Amazon and Community Bancorp:

Amazon.com, Inc. (AMZN) – Buy

I added to my position in Amazon.com, Inc. (AMZN) today at $1,757.76. It is now our 3rd largest position at this time.

Most of the same reasons for my previous purchases still stand.

We did quite well selling products for our Wondermugs business on Amazon.com and have increased our advertising spending to get our listings rank higher in Amazon’s shopping searches.. We expect to sell significantly more mugs this year than last year.

Some overall threats to Amazon are:

  • Amazon.com’s will have more margin pressure from increased investment/competition from competitors such as Walmart, Costco, and Target.
  • International expansion holds no guarantee of matching success as the US Market
  • AWS is facing increased competition from strong competitors such as Google and Microsoft.
  • Government pressure due to size and influence.

However, the positives are:

  • Amazon.com dominates the overall e-commerce market with sizeable international growth opportunities for it’s marketplaces, advertising and devies
  • Strong growth in devices to help keep and bring in new customers.
  • Strong favorability with Generation Z.
  • Increasing number of shoppers initiating their searchers with Amazon instead of Google
  • Increasing advertising share and signups from 3rd party sellers on their platform, which helps the ability for Amazon to increase profits while reducing costs/burdens of selling inventory directly.

The stock currently trades at a PEG of 1.1 which is quite good and makes for a good buying opportunity.

Facebook Inc (FB), Carrols Restaurant Group, Inc. (TAST), and Amazon.com, Inc. (AMZN) – Buy

   

Once again, I added more to my positions today in Facebook Inc (FB) at $144.41, Carrols Restaurant Group, Inc. (TAST) at $9.60, and Amazon.com, Inc. (AMZN) at $1587.31

The continued price drop in all three of these are a great opportunity. Retail sales are strong and Amazon and Facebook will benefit from this. Amazon with actual sales and advertising, and Facebook with advertising on Facebook itself and Instagram.

Amazon has been very aggressive with increasing it’s share of holiday sales and we are seeing that personally with our Wondermugs business. We have sold over twice as many mugs on Amazon this year compared to last year. With Facebook, we are personally spending significantly more this year on ads as well as for our clients of Advantage Creations.

With Carrol’s the price drop is just making the company very cheap. At today’s price, the market is valuing the 828 stores at only $729,773 each. To start a brand new store, you are typically looking at an initial investment of $1,200,000 to $2,800,000. These are mostly proven stores with excellent management in place.

Some are thinking the economy is going negative. If that’s the case, people still need to buy goods, will still use social media and go out to eat. Amazon and Carrols provide great prices on products. Facebook/ Instagram will still be used.

There are of course other pressures on these specific companies. Facebook with it’s privacy concerns, Amazon with other retailers getting more competitive and Microsoft with cloud services and Carrols with McDonalds, but I believe at these prices all of these concerns are priced in and then some.

Here is my previous analysis on all three:

Amazon.com, Inc. (AMZN) – Buy

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:

  • Inability to make significant profits from the amazon.com retail business.
  • Political/social pressure from their growing size and influence on the retail industry.
  • Slowing growth in revenue.
  • International expansion difficulties.
  • Amazon Web Services competition from well capitalized competitors: Microsoft (MSFT) and Google (GOOG).

Why Amazon?

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.

Valuation

Amazon currently trades at a:

  • 59.2 forward PE
  • Price/Book of 20.5
  • PEG of 1
  • PEG payback in years is 6.7
  • Dividend yield is 0

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.