The problem so many investors have — myself included — is that we suffer from what mathematician John Allen Paulos called “innumeracy.” So when I tell you that Amazon (NASDAQ:AMZN) is worth $1.6 trillion as a company, you might well say, “a billion, a trillion, what’s the difference?” Well, if you hold AMZN stock, there is a difference.
Let’s say outgoing CEO Jeff Bezos decides to throw a party for Planet Earth, and give away a million bucks a day to whoever wants it. Nah, let’s say $10 million a day. It would take him, oh, 448 years, assuming the world’s often-richest man has cracked the Fountain of Youth code along the way.
That “innumeracy” which plagues so many of us makes us unable to reason and to apply simple numerical concepts. And with a behemoth like Amazon, we need to have a modicum of numeracy
Amazon is worth more than the annual gross domestic product of Canada, South Korea, Russia, Brazil, Australia, Spain — or Saudi Arabia, times two. Not bad considering that Amazon began as a bookseller and almost went by the name “Cadabra” until a buddy of Bezos told him it sounded an awful lot like “cadaver.”
Not that anything can kill AMZN stock at this point. Am I bullish? Hell, yeah.
Bright Future for AMZN Stock
For a moment, let’s pretend Amazon is just another e-commerce company. (But not for too long, otherwise I’ll panic over where to buy my 24 packs of Australia’s Bundaberg Diet Ginger Beer.) If you’re selling tons of stuff on line, then guess what? Consumer habits shifted for good in 2020 with the novel coronavirus pandemic. City, suburbs, wherever: Chances are you saw more navy blue Amazon delivery vans roaming your neighborhood last year than ever before.
But if that was all AMZN stock had going for it, this story might well end here. The biggest money maker for Amazon by far is AWS, or Amazon Web Services. And the man who built that business into a juggernaut’s juggernaut, Andy Jassy, will take the reins from Bezos when he steps down as CEO in the third quarter of 2021.
In the digital world, cloud computing is where it’s at. Jassy knows that better than anyone at Amazon — Bezos included. So if you think AMZN stock is rocking it right now — which would be a $1.6 trillion understatement — Jassy could well launch it into hyperdrive. The world’s biggest tech players, including Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL), are sizing up and seizing opportunities in the cloud right now. And they have to. The cloud is changing everything. They know it and they’re out front: Amazon is as well.
Tech Success That Isn’t Going Anywhere
Republicans and Democrats in Congress who can’t even agree on the color of the sky do share one thing: a disdain for tech giants that borders on contempt. That could spell bad news for and the breakup of Facebook (NASDAQ:FB) and Alphabet, which have monopolized social media and search, hoarding citizen data along the way.
While Amazon occupies that tech gorilla category as well, it doesn’t strike me as a likely target. Though it’s a false and flimsy stereotype, it sells stuff, so far as most people and even elected officials are concerned. It streams entertainment. It wants to deliver my diet ginger beer by drone someday. Yours, too. (You have to try this stuff.)
Yes, it has tons of your data as well. But as long as Prime delivery is fast and free, it doesn’t strike me as a tech target in the crosshairs of Congress. Hey, who wants to lose Prime for good? Congress, schmongress: Imagine a senator trying to explain the reputation of “Prime Killer” to the kids and spouse.
What’s more, analysts on Wall Street fall all over themselves for the honor of kissing Bezos’ ring, which might as well be made of Martian minerals given all the money he’s got. An astounding 43 of 50 call it a buy, with five more calling it overweight. No one rates it underweight or sell. So, should we all buy AMZN stock or what?
Now a Portfolio Essential
In my own search for financial freedom and security, I consider AMZN stock a portfolio essential. It boasts gains still worthy of the growth stock it once was — it shot up 75% in 2020 — along with the financial security of a fortress. Hard as it is to believe, it’s actually down a smidge in 2021, but that may be a combined function of profit taking and the markets still a bit jittery about Bezos moving on as CEO.
They shouldn’t be. Jassy needs to prove himself, but so did Tim Cook when Steve Jobs stepped away at Apple (NASDAQ:AAPL). Believe me, this is going to work out.
And when it does, you can thank me later. Because, as you know, I’m all about Amazon… and my newfound obsession with diet ginger beer, of course. How much of that could $1.6 trillion purchase? I’d rather stick to the math surrounding how much my own returns will buy. There’s no innumeracy involved there, I’d think: just innumerable opportunities.
On the date of publication, Lou Carlozo held long positions in AMZN, AAPL and MSFT.