Amazon Inc

[BusyBumbleBee]

But - if the rumour in the Telegraph over the weekend is true then it could be our old 'friends' the bankers that are next on Amazon's hit list and I for one won't be sorry. Amazon is a great business in my view and is shaking up the whole retailing sector - to the benefit of us all.

[Lootman]

Amazon seems to go up by 1% a day, every day. It's a phenomenon we haven't seen since the dot.com days, but of course there is something much more significant and valuable about its business. Amazon's execution is impeccable.

Some think that Amazon may hit the magic trillion dollar market cap before Apple does, even though the latter is significantly closer to that level already. And Bezos is now the world's richest person.

I bought Amazon in 2016 after finally deciding that it's 100 plus P/E ratio didn't matter because the Amazon model is so different from any other business (yes, it might really be different this time).

By that good fortune Amazon has become my biggest US holding. Maybe I should trim it, but then what would I buy instead? (I already hold Apple, FaceBook and Google).

[SalvorHardin]

I find Amazon impossible to value; the company considers profits to be largely irrelevant as it moves into many markets. Presumably the ultimate aim is to crush competition and expand profit margins afterwards; regulators will eventually do something about that because they despise private monopolies. The lobbying power of the banks to hamstring Amazon, if it enters their markets, should not be underestimated

I own quite a few Amazon shares indirectly through investment trusts. Most of my North American holdings are about as Amazon-proof as I can find; Freight Railroads, Berkshire Hathaway, Canadian gold explorers and Madison Square Garden. My most exposed holding is Disney, which I recently went back into after holding for over a decade, though Disney is more at risk from Netflix and cable-cutting with Amazon Prime video coming in a distant third as a risk.

There is the prospect of a backlash against "big tech" from politicians and regulators, particularly over tax dodging, job destroying and censorship. The Economist did a feature about this recently (link below).

http://www.economist.com/news/briefing/ ... cebook-and

[Clitheroekid]

Amazon is a great business in my view and is shaking up the whole retailing sector - to the benefit of us all.

I agree that it's a `great' business from a purely selfish point of view, in that it's highly efficient, and I regularly use it myself.

However, it is certainly not to the benefit of us all. Although we as customers benefit from its efficiency the people who work for Amazon seem to have a pretty dreadful life - http://www.independent.co.uk/news/uk/ho ... 79111.html Some of the conditions of employment hark back to the Victorian mills, but without the philanthropy!

Amazon has also put out of business many retail businesses in the UK and elsewhere. Although you may say that such destruction is just the market economy behaving efficiently it's not much consolation to the tens / hundreds of thousands of people who owned or worked for those businesses.

Amazon also pay virtually no tax in the UK, whereas their destroyed rivals did. And any profits that Amazon make go back to California instead of being circulated in the UK.

So whilst I may admire Amazon on a purely economic / efficiency level I heartily dislike them for what they are doing to society as a whole. I consider their economic might to be positively dangerous - like the 19th century monopolies in the USA - and wish I could see some prospect of their imperial expansion being curtailed.

But I can't, and an Amazonian future is not a pleasant thought.

[Lootman]

Amazon also pay virtually no tax in the UK, whereas their destroyed rivals did. And any profits that Amazon make go back to California instead of being circulated in the UK.

Amazon barely pays any tax anywhere, for the simple reason that it has never made a profit. All its earnings are ploughed back into the business in order to fund its growth, expansion and (probably) attempts to achieve world domination.

And Amazon is headquartered in the Seattle area, so any benefits accrue to Washington State, not California.

The UK government does receive the VAT on Amazon sales, of course, as well as income tax and NICs on Amazon's UK employees - I would not call that "virtually no tax". And yes, bricks-and-mortar retailers are having a tough time, but that is due to online retail in general and not just Amazon. It's a general trend that I doubt is going away.

[SalvorHardin]

On a (slightly) more serious note, should we be looking at our own portfolios and considering which stocks could be potentially be 'Amazoned'?

A lot of companies could be "Amazoned" and unfortunately for them Amazon isn't the only company to worry about. Facebook and Google are demolishing the regional and national newspaper business in a similar way to how local newspapers have lost much of their advertising business to the likes of Craigslist and eBay.

For quite some time I've primarily invested in companies which has a strong "moat" (as Warren Buffett calls it) where it is difficult to attack the business' markets using the internet. An example is the freight railroad Union Pacific; you cannot realistically hope to build another railroad nowadays, you can't move cargo via the internet and railroads are vastly more efficient than trucks over long distances.

A big problem is that companies are reluctant to adapt to online competition by doing something similar because this undercuts its existing business. The TV companies have taken a long time to react to Netflix, their streaming services may stem the loss of viewers but most failed to see what was happening (and they greatly helped Netflix to get established by letting it use their content).

I've just finished Brad Stone's book "The Everything Store", a history of Amazon which goes into some depth regarding Amazon's business practices and the fights it has had with several industries. I'd strongly recommend it (and yes, I ordered it from Amazon).

That said I am ultimately expecting the big internet companies to be hampered and eventually broken up by governments, if only because of the threat that they pose to their tax bases.

[Lootman]

That said I am ultimately expecting the big internet companies to be hampered and eventually broken up by governments, if only because of the threat that they pose to their tax bases.

I would not under-estimate the ability of the tech giants to be able to handle that if and when it emerges as an issue. An example is in the US where the States were complaining that Amazon was not charging the relevant state sales tax for its out-of-state orders. Amazon responded very cleverly. Despite the fact that the States could not pass a law enforcing Amazon to apply the sales tax (such a law would be invalid as it contravenes Federal rules on inter-State trade), Amazon voluntarily offered to collect and pay the tax.

That sounds like Amazon lost the battle, but in fact it enabled Amazon to set up a physical presence in each State - warehouses that allow next-day and even same-day delivery - something they had wanted to do anyway. Their competitors wanted to keep their "tax-free" advantage to consumers but, because of much longer delivery times, they continued to lose out to Amazon, which just understood the marketplace realities better.

So I am sanguine about the ability of Amazon, FaceBook and Google to finesse such pressures, although of course there will always be some countries that will try and block them. Apple, as a consumer products company, won't have the same issues anyway.

[MaraMan]

Interesting posts and observations. I think there is no stopping Amazon until perhaps we reach a Standard Oil type situation and the state decides to break it up, but that probably was easier in the early 20th century than the 21st century. I think they will continue to expand with almost no end in sight, with that in mind I feel that it is foolhardy not to invest them, at least for me (no criticism of others who avoid, for whatever reason). They do disrupt traditional industries and are not driven by profit, also Amazon Web Services is a very successful, world leading company. I understand the high-street is suffering but its Darwinian, evolve or die. As far as the tax is concerned, that's down to the legislators to solve, its not for Amazon to change. Even when that nut is cracked I don't see it impacting Amazon's business significantly.

I have held a smallish shareholding in them for about 5 years but 12 months ago I invested a reasonable lump of my SIPP. Since then the SP has increased by 95%. I do worry that this is a bubble that could burst in the short term, but the long term trend seems unstoppable, and with the increase in values so far even a sizable reduction in SP would not dent the returns to an unacceptable level. I have considered top slicing my holding, but will probably just let it run.

MM