Amazon (AMZN) Has Risen 80% in Last One Year, Outperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of RiverPark Advisors top stock picks. RiverPark Advisors, an investment management firm, is bullish on Amazon.Com Inc (NASDAQ:AMZN) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Amazon.Com Inc (NASDAQ:AMZN) stock. Amazon.Com Inc (NASDAQ:AMZN) focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.

In July 2019, RiverPark Advisors had released its Q2 2019 investor letter. The investment firm said that Amazon.Com Inc (NASDAQ:AMZN) stock was one of the top holding’s in Q2 2019. Amazon.Com Inc (NASDAQ:AMZN) stock has posted a return of 79.7% in the trailing one year period, outperforming the S&P 500 Index which returned 11.8% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Amazon.Com Inc (NASDAQ:AMZN) stock has risen by 69.3%.

In Q2 2019 investor letter, RiverPark Advisors said the Large Growth fund posted a return of 7.4% in the second quarter of 2019, outperforming fund’s benchmark the S&P 500 Index which returned 4.3% in the same period. Let’s take a look at comments made by RiverPark Advisors about Amazon.Com Inc (NASDAQ:AMZN) stock in the Q2 2019 investor letter.

“Another “prime” (pun intended) example of this higher for longer phenomenon for a well know company is one of our top holdings, Amazon. Amazon has often been viewed as “expensive” with a free cash flow (“FCF”) multiple7 mostly between 35x and 150×8 over the past several years. When we initiated our position in February 2016 (at $488 per share), AMZN’s FCF multiple on our estimates had dipped to around 23x our 2016e FCF estimate of $10 billion. We believed, from our modeling and field work, that the company’s marginal profitability and free cash flow conversion were both at an inflection point with dramatic growth possible for both metrics over the next few years. At the time, FCF for the next three years was estimated by Wall Street to grow by 31% per year to $23 billion for 20199 . Actual FCF growth has been much more significant – at 45% per year – and now is expected to be $30 billion for 2019.10 Based on its actual growth, when we initiated our position, AMZN shares traded at only 11x 2019 FCF. Today, Wall Street remains mostly bullish on the company and estimates that Amazon’s FCF will grow by 42% per year for the next three years to $66 billion for 2022. 11 AMZN shares trade at a relatively reasonable rate of 15x this current 2022 Wall Street estimate for FCF. However, if FCF grows a bit faster at 55% per year to $85 billion – which we think it will as we expect revenue to continue to grow at a high-teens rate and believe the company can continue to significantly increase margins while maintaining capital expenditures – AMZN shares currently trade at an even more attractive 11x 2022 FCF.”

25 best things to buy on Amazon under $20

25 best things to buy on Amazon under $20 (Photo credit: Pixabay)

In Q2 2020, the number of bullish hedge fund positions on Amazon.Com Inc (NASDAQ:AMZN) stock decreased by about 1% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Amazon’s growth potential. Our calculations showed that Amazon.Com Inc (NASDAQ:AMZN) is ranked #1 among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.