Wedgewood Partners, an investment management company, released its first-quarter 2026 investor letter. A copy of the letter can be downloaded here. Wedgewood Composite delivered a net return of 9.4% in the second quarter compared to 15.2% for the Standard & Poor’s 500 Index, 16.7% for the Russell 1000 Growth Index, and 13.9% for the Russell 1000 Value Index. The firm is optimistic about the long-term growth of hyperscalers and has increased its investments in this sector, citing their significant earnings potential and crucial role in AI adoption. Capital has also been redirected towards technology hardware stocks, especially semiconductors, which now make up a larger share of the S&P 500 Index. Semiconductor stocks have benefited from hyperscalers’ spending, but the firm expresses caution about cyclical risk and volatility. However, the momentum-driven market negatively affected the Wedgewood fund’s high-quality stocks, leading to a 25% return over the past 15 months, significantly underperforming the 90% gain of the S&P 500 Momentum ETF (SPMO). In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Wedgewood Partners highlighted Amazon.com, Inc. (NASDAQ:AMZN). Amazon.com, Inc. (NASDAQ:AMZN) is a multinational technology and retail company known for its leading online marketplace and cloud platform. On July 16, 2026, Amazon.com, Inc. (NASDAQ:AMZN) closed at $249.89 per share. One-month return of Amazon.com, Inc. (NASDAQ:AMZN) was 2.25%, and its shares gained 10.51% over the past 52 weeks. Amazon.com, Inc. (NASDAQ:AMZN) has a market capitalization of $2.69 trillion.
Wedgewood Partners stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2026 investor update:
“Although Microsoft, Amazon.com, Inc. (NASDAQ:AMZN), and Meta have different business models and were not necessarily top drivers of performance during the quarter, we view their investment opportunity set, from both a compounding and returns perspective and a component-cost hedge perspective, as similar to Alphabet’s.
As we have noted before, Amazon is another member of this elite group generating high returns, and we think it is being quite rational by rapidly compounding its asset base at these returns. During the quarter, Amazon grew revenue by 17% and operating income by 30%. While the bears continue to complain about Amazon’s $200 billion in capex growth and dwindling free cash flow, we estimate this incremental capex will increase the 2025 total asset base by around 28%. With 30% cash flow growth on what we assume is at least 28% asset growth, we conclude Amazon is achieving at least as good, if not better, returns on capital than it has previously – yet the stock is trading near historically depressed multiples. This is another telltale sign to us that the Company’s aggressive free cash flow reinvestment is very rational and that the depressed valuation presents an excellent long-term investment opportunity for us. Moreover, we estimate the Company’s investment in Anthropic is worth at least $100 billion and, if realized, will serve as another effective hedge against commodity memory price inflation, especially in DRAM, over the next few years. That should be long enough to offset inflation until more DRAM capacity comes online to moderate prices.”
Amazon.com, Inc. (NASDAQ:AMZN) is in top position on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 353 hedge fund portfolios held Amazon.com, Inc. (NASDAQ:AMZN) at the end of the first quarter, compared to 381 in the previous quarter. Amazon.com, Inc. (NASDAQ:AMZN) reported a strong Q1 2026, with revenue increasing 17% year-over-year to $181.5 billion. While we acknowledge the risk and potential of Amazon.com, Inc. (NASDAQ:AMZN) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Amazon.com, Inc. (NASDAQ:AMZN) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Amazon.com, Inc. (NASDAQ:AMZN) and shared the list of best stocks to buy from Ray Dalio stock portfolio. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
