RiverPark Funds is bullish on Amazon.com, Inc. (NASDAQ:AMZN), which is the largest Internet retailer in the world in terms of revenue and market capitalization. In its Long/Short Opportunity Fund Q4 Investor Letter, RiverPark made comments about Amazon and noted that the e-commerce giant is “extremely well positioned for years of continued strong growth.” Let’s take a look at RiverPark’s commentary about Amazon.
Amazon.com (Long): AMZN shares also reacted positively to strong quarterly results. The company’s revenue grew 34% for the third quarter to a record $44 billion, as Amazon extended its retail reach with its Whole Foods acquisition, continued to execute on its broad e-commerce initiatives and continued to post impressive growth and margins in its cloud computing division (Amazon Web Services). In addition to strong sales growth (and despite the third quarter typically being a period of heavy spending in anticipation of the holiday season), the company’s margins and profits also surprised investors to the upside.
As the leader in both global e-commerce (marketing research firm eMarketer estimates that Amazon will command 44% of e-commerce sales this year, compared with 38% last year) and cloud computing, Amazon remains extremely well positioned for years of continued strong growth. The company continues to invest heavily in maintaining its leadership – not only in retail and web services, but also in fulfillment centers, video content, marketing, Echo/Alexa, and nascent geographies (such as India). With its core divisions continuing to be innovation and market share leaders in rapidly growing industries, we believe sales will continue to grow in excess of 20% per year for the foreseeable future. Although operating and capital expenditures will cycle through periods of higher and lower growth as the company presses its leadership, we believe the company will also significantly expand its profitability over time and generate a dramatic increase in excess free cash flow over the longer term, which should continue to fuel strong stock price performance.
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Amazon shares surged 56% in 2017, while the stock has gained over 23% since the start of this year. During the last 12 months. AMZN has moved up more than 72%. The tech giant’s stock has an average rating of Buy and an average price target of $1,661 from 48 analysts polled by FactSet Research. During the afternoon trading session, AMZN was trading up 1.79% at $1,439.85.
Meanwhile, Amazon.com, Inc. (NASDAQ:AMZN) is one of the most popular stocks among active investors and hedge funds. There were 133 hedge funds in Insider Monkey’s database with positions the Seattle-based tech giant, including Tybourne Capital Management and Kamunting Street Capital.
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For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
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