American e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) released its quarterly earnings results for the second quarter of 2015 after the market closed last night, and the company delivered a shocking surprise profit that got Wall Street quite excited. The Seattle, Washington-based retailer posted earnings per share of $0.19 on revenue of $23.18 billion. The results sent the stock soaring in Thursday’s after market trading, and it’s currently trading up by more than 15% this morning. Needless to say, the results were a big surprise to analysts, as Wall Street expectations were relatively muted in terms of earnings heading into the release. In fact, analysts expected Amazon.com, Inc. (NASDAQ:AMZN) to post a net loss of $0.14 per share on revenue of $22.4 billion. It wasn’t Wall Street analysts alone who were surprised, as Amazon.com, Inc itself had estimated a rise in revenue by between 7% and 18% year-over-year and not to the extent that the stock delivered (over 20%). A big contributor to this rise was Amazon Web Service, the company’s cloud computing segment. The segment earned the company $1.82 billion in net sales, up from $1.57 billion in the last quarter, and 81% above its second quarter of 2014 earnings.
The improved results certainly didn’t catch the smart money off guard, which had been very bullish on the company since the start of the year. Heading into the second quarter of 2015, a total of 96 of the hedge funds tracked by Insider Monkey were long in this stock, an increase of 20 from the end of the fourth quarter. The hedge funds held aggregate investments valued of $8.40 billion going into the second quarter, which was a significant increase compared to the $5.91 billion in shares they held going into the the first quarter. Being long in the stock, and understanding Amazon.com, Inc’s long term approach, their sentiments sent a clear signal that there was something good cooking. Amazon is now up by more than 78% this year.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 139% since then and outperformed the S&P 500 Index by around 80 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Insider activity is also a key metric that Insider Monkey keenly monitors, as it gives a picture of what insiders think of a stock. Over the past three months, insiders have made 17 sales of shares, while there have been no purchases. Over the past 12 months, there has been only one purchase, involving 5,771 shares. On the other hand, there were a total of 77,018 shares sold over the past three months and 208,561 shares over the past 12 months. However, it should be noted that insider selling is a much weaker signal than insider buying, and can occur for a variety of reasons.
Now that you clearly understand why we take keen interest in hedge fund activities relating to the stocks in our database, let’s see what hedge funds thought about Amazon.com, Inc.