4. Amazon.com, Inc. (NASDAQ:AMZN)
Value of Coatue Management‘s 13F Position: $494 million
Number of Hedge Fund Shareholders: 274
Coatue Management cut its position in Amazon.com, Inc. (NASDAQ:AMZN) by 44% during Q1, lowering its stake to 151,595 shares. Hedge fund ownership of the ecommerce giant took off at the start of the pandemic and hasn’t dropped below 250 since, with close to 30% of the group of select hedge funds that are tracked by Insider Monkey’s database being long AMZN.
Amazon.com, Inc. (NASDAQ:AMZN) is not only a compelling investment in terms of being the dominant ecommerce company in North America, but also as one of the leading AI companies, which is where Amazon’s future growth is likely to come. Amazon’s Web Services, which provides a variety of AI tools to customers, is already a massive cash cow for the company, generating $6.5 billion in operating income during Q1. And with the AI market expected to grow to $1.6 trillion within eight years, there’s likely plenty more of that in store for Amazon in the years to come.
The Polen Global Growth Fund is impressed with the way Amazon.com, Inc. (NASDAQ:AMZN) managed its way through the pandemic, having this to say about the company’s initiatives in its Q1 2022 investor letter:
“Amazon has done a terrific job managing through the pandemic, in our view. Many companies struggled to pivot their business model during COVID-19, which represented an existential threat.
Amazon had the opposite problem – a surge in demand. The company leaned into this by entering an extremely heavy investment cycle, doubling its fulfillment network and headcount over the past two years. To put this into context, Amazon added 273,000 employees in the last half of 2021 on top of over 400,000 employees the prior year. The company has also made significant Capital Expenditures, adding IT infrastructure for AWS and transportation capacity during this period. This all took place in the face of inflation related to wage increases and higher pricing from third-party carriers supporting the company’s fulfillment network. These heavy investments paid off—AWS grew 40% year over year, reached a $71B annual run rate, and total company revenue posted a two-year annual compounded growth rate of 25%. We believe this heavy investment cycle, like Amazon’s previous ones, will continue to support ongoing growth and will further separate Amazon from its competition while also providing the ability to increase margins through economies of scale. With respect to the margins specifically, AWS and Advertising – two fast-growing businesses – continue to contribute greater operating earnings to the overall business. We believe management has done an excellent job managing through this period and that the company is even stronger today than when COVID-19 first began to spread around the world.”
