Amazon.com, Inc. (NASDAQ:AMZN) A champion of value investing
Buffett has long been a champion of a style of investing called value investing. The approach was pioneered by Buffett’s mentor, teacher and author of “Intelligent Investor” Benjamin Graham.
Graham’s value-based disciplines on investing included: (1) finding stocks trading below intrinsic value; (2) looking for stocks with low price-to-book and price-earnings ratios; and (3) favoring companies steady profits. Buffett has used his mentor’s guideposts to scoop up large stakes in Coca-Cola (KO) and Delta Air Lines (DAL) over the years and not overpay for big acquisitions such as railroad Burlington Northern.
Buffett has also spun that intense focus on value investing into one of the greatest investing quotes of all time — one that no doubt has served many long-term investors well. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful,” Buffett said.
Buffett’s Amazon wager
But Buffett’s purchase of Amazon flies in the face of his long-held investing views. Amazon’s stock — always trading on rich valuation multiples given its status in the tech industry — currently fetches a lofty forward price-to-earnings multiple of 51 times, per Yahoo Finance data. That’s about two and half times the forward price-to-earnings multiple of the S&P 500. The stock trades at an exorbitant 20 times price to book ratio on a trailing 12-month basis.
And, above all else, Amazon is known for not having steady profits as it invests aggressively to support growth businesses in retail, Alexa and the cloud.
Buffett’s Amazon wager appears to be rooted in the logic of the stock trading on higher valuation multiples 25, 50, 100 years from now as Amazon pushes forward with its dominance across many industries. The legendary investor probably has a firsthand look at how disruptive Amazon could be via his consumer oriented businesses.
“The considerations are identical when you buy Amazon versus some bank stock that looks cheap consistently book value or earnings,” Buffett said at the shareholder meeting.
Added Buffett’s right-hand man Charlie Munger, “Of course as something as this internet development happens and you don’t catch it, other people are going to blow by you. I don’t mind having not caught Amazon early, the guy [Jeff Bezos] is kind of a miracle worker. It’s kind of peculiar.”
Given this otherwise tweaked investment philosophy inside Berkshire, one has to wonder how long Ted or Todd wait to pull the trigger on another game-changing tech company with Amazon like characteristics — the soon publicly traded Uber.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1,808.77.
The projected upper bound is: 2,022.52.
The projected lower bound is: 1,891.34.
The projected closing price is: 1,956.93.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 70.2306. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 66.76. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 85. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.
Rex Takasugi – TD Profile
AMAZON COM closed down -11.910 at 1,950.550. Volume was 8% above average (neutral) and Bollinger Bands were 23% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,926.87 1,792.77 1,752.51
Volatility: 29 23 45
Volume: 4,925,444 4,260,599 5,683,941
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
AMAZON COM is currently 11.3% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of AMZN.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AMZN.O and have had this outlook for the last 39 periods.
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