Third Point Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio return of -5.3% was delivered by the flagship Offshore Fund for the final quarter of 2021, bringing its year-to-date returns to 22.7%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Third Point Management, in its Q4 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ: AMZN) and discussed its stance on the firm. Amazon.com, Inc. is a Seattle, Washington-based e-commerce company with a $1.5 trillion market capitalization. AMZN delivered a -8.47% return since the beginning of the year, while its 12-month returns are down by -6.09%. The stock closed at $3,052.03 per share on February 19, 2022.
Here is what Third Point Management has to say about Amazon.com, Inc. in its Q4 2021 investor letter:
“We have long admired Amazon as investors (and appreciated its myriad benefits as consumers) and have owned shares several times in the past. We acquired a sizable position during the early innings of the pandemic ahead of what we believed would be a structural acceleration in revenue for the group. After lagging tech peers for most of last year, we significantly increased the size of our investment, reflecting our conviction that Amazon is at an important crossroads as new management considers its long-term strategic plan to move the company forward, which may include several bold initiatives that are the subject of wide market speculation at the proverbial investor water cooler.
Amazon’s most recent quarterly results bolstered our view that the company is now at an inflection point that should usher in an improvement in various metrics, as well as an upturn in the company’s share price. The long-term secular growth drivers for the company—cloud adoption and eCommerce penetration—remain firmly intact. Sales growth ought to reaccelerate as revenue comps ease. Fixed cost leverage should improve after a large investment cycle that effectively doubled the fulfillment capacity of the company over the past two years. Excess costs associated with the Covid pandemic, labor shortages, and supply chain disruption should start to disappear as the external environment normalizes. And, shares are still trading at the lower end of the company’s historical multiple range. It’s not often that you get to buy shares in a high-quality company at the low end of its valuation range ahead of a meaningful reacceleration in growth at a 30%-40% discount to its present intrinsic value with an almost unlimited runway of potential to compound in value.
While the fundamental outlook for shares looks bright, we were encouraged by two additional developments this quarter. First, we noted the Board repurchased shares in January 2022 for the first time in a decade. It is not hard to imagine that Amazon, like some of its peers, may start returning more capital to shareholders, especially as the balance sheet approaches a net cash position and free cash flow improves. Second, we noted the introduction of additional disclosure from management, specifically breaking out advertising revenue and detailing capital expenditures by category. Amazon is a large and complex company and greater financial disclosure will no doubt help investors better understand the various parts of the business and significant sum-of-the-parts value. We expect these shareholder-friendly moves may be just the tip of the iceberg as Amazon’s talented and focused new CEO Andy Jassy sets out his plan for the Company’s future.”
Our calculations show that Amazon.com, Inc. (NASDAQ: AMZN) ranks 1st on our list of the 30 Most Popular Stocks Among Hedge Funds. AMZN was in 279 hedge fund portfolios at the end of the third quarter of 2021, compared to 242 funds in the previous quarter. Amazon.com, Inc. (NASDAQ: AMZN) delivered a -16.99% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on AMZN in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
