Clay Finck (02:52):

So in today’s episode, I wanted to dive into some of your investing philosophies, how you think about things. I really enjoy chatting with people from The Motley Fool. They just think of things in a unique way that I find really interesting, personally. And we’re going to talk a little bit about Amazon stock as well.

Clay Finck (03:09):

So to get things kicked off, how would you characterize yourself as an investor, and how has that maybe changed over the years?

Jason Moser (03:15):

I think the convention is most people say, “Well, I’m either a growth investor or a value investor.” I think that’s what most people qualify themselves as. I will admit, one of the things I learned very quickly when I got to the Fool was even though I had been investing for so long, I really didn’t know what kind of an investor I was.

Jason Moser (03:34):

And so through the years, I came to the conclusion I’m not a growth guy or a value guy. I just like finding good businesses and being able to invest in them. I’ve always considered myself a quote-unquote motley investor in that I’m just really not afraid to go wherever my interest takes me. I guess, both at a reasonable price, would probably be the easiest way to classify me if you needed to do so.

Jason Moser (03:59):

But generally speaking, I just like finding great businesses. And then I like hitching my wagon to those stars and seeing how far they can go.

Clay Finck (04:08):

You mentioned growth at a reasonable price and I can’t help but think how pricey things seem to be today. So, are you comparing how one company looks against another today? Are you looking at historical metrics or how do you think about that?

Jason Moser (04:24):

Yeah, it’s very difficult to ignore historical multiples, historical levels. We look at some of the multiples out there today, particularly with a lot of these businesses that aren’t even generating any profits and it does feel like 30 to 40 times sales is the new 30 to 40 times earnings. And that takes a little bit of getting used to.

Jason Moser (04:46):

I think it’s all relative. If you’re seeing this tide rising and it’s lifting all boats, then I think it becomes even more apparent to really be able to compare the various boats, to make sure you’re not hopping all in one that may have a hole in it. So, it is definitely all relative. It’s very difficult to find what we’d probably traditionally call reasonable prices today.

Jason Moser (05:07):

And so one of the things we continue to hammer home with our members and listeners at The Motley Fool is just really focus on the quality of the business. We do take that long-term approach and we feel like time is the individual investor’s greatest advantage, or at least it’s one of our greatest advantages. And so it just becomes more important to really focus on understanding the business and understanding what you’re getting for your dollars.

Jason Moser (05:31):

That’s the way we’ve been approaching it here the last few years, because it feels like it’s not going to change anytime soon.

Clay Finck (05:37):

So you’ve been in the markets for a number of years now, at least relative to me. I first got started investing seriously around 2015 or so and didn’t get my first full-time job until 2017. I’m curious, what are one or two of the biggest investing mistakes that you’ve made throughout your career as an investor?

Jason Moser (05:58):

I think for me, we all make bad investments. We all pick stocks that we think are going to win and they ultimately don’t. I think for me, the biggest mistakes always seem to come from maybe not knowing a particular business or the market it’s pursuing as well as I thought I did. And then coupling that with not really thinking forward enough, judging a business on the success it’s already chalked up, instead of focusing more on the success it should or it could potentially chalk up in the future.

Jason Moser (06:29):

Really, I think focusing on the future, it’s really important. That’s what investing is all about. When we talk with new investors, getting that concept across the stock market as looking into the future, and it’s telling us where it thinks these businesses are headed. It’s not as much about, what have you done for me? It’s, what are you going to do for me?

Jason Moser (06:46):

It feels to me like that’s something I work on consciously is to try to think more forward. Like what’s the next step for this company? What could this company do 10 years from now that it’s not doing today? That, I think gives me a little bit of a better mindset. It’s not something I was necessarily as focused on growing up as an investor, or even really when I got to The Motley Fool back in 2010.

Clay Finck (07:11):

And you mentioned thinking forward and understanding the business very well. I did some research on your background and it looks like you’ve dug into the metaverse, which we’re hearing all about lately with Facebook changing, being turned into meta. I know you’ve looked into augmented reality, which is probably pretty similar.

Clay Finck (07:31):

Could you dig into what opportunities you’re focused on in the market currently at your role at The Motley Fool, and for your personal portfolio as well?

Jason Moser (07:39):

We have the good fortune at the Fool to be generalists. We’re not assigned a given sector or a collection of companies that we necessarily have to follow. So that gives you a chance to pursue your interest to an extent. I am the lead advisor for two of our services today at the Fool.

Jason Moser (07:55):

One, you mentioned augmented reality. One of those services is called Augmented Reality Beyond, and it’s focused on finding ideas in immersive technology, companies that are utilizing augmented and immersive reality, companies that are responsible for building that technology and those experiences. That’s been a lot of fun and that’s something that’s certainly getting a lot more attention now, particularly with Facebook now being meta and really focusing on the metaverse there.

Jason Moser (08:21):

And then the other service that I run is, it’s focused on the digital economy in 5G. It’s called NextGen Supercycle. It’s labeled as the 5G service, but it really, going back to that thinking forward idea, it’s not just 5G, but it’s all of the opportunities that 5G is enabling. I try to about space as an example. You’ve got the Sun at the center of the solar system there. 5G is kind of the Sun. And then the planets orbiting the Sun are all of the opportunities that 5G is enabling. Whether it’s machine learning or artificial intelligence, Internet of Things, immersive technology, stuff like that.

Jason Moser (08:57):

Those are the two services I run. So that’s where my interests and focus are taking me these days. I’m also very fortunate, I host one of our shows at the Motley Fool, the Industry Focus Monday show, which is financials. I get to dabble a little bit in the financial space and all of those newfangled FinTechs that are changing our lives too. So that’s a fun area that I like to follow as well. The payments industry in particular, but most of my attention is given to those two services.

Clay Finck (09:23):

You mentioned the show that you run, and I’ve listened to it, a few of those episodes. And you’ve mentioned the similarities in today’s market relative to the dot-com bubble in the 2000 timeframe. What similarities are we seeing between now and then and how might this time be different?

Jason Moser (09:41):

It does feel like, the similarities seem to be almost a mania in some cases, where folks are getting into the market not necessarily knowing what they’re doing, that’s sort of psychology or that feels similar, along with a lot of these lofty valuations. I think that one thing that maybe could make this a little bit different is that we do have a better understanding of the power of the internet and how it’s changing our lives.

Jason Moser (10:06):

We didn’t really have that understanding back then in the dot-com era, because it was so new, the internet was this brand new thing. We were just getting this idea of, holy cow, what is this? You’re telling me I can put my credit card just in the computer and pay for stuff? That was a novel concept back then. Now, it’s just standard operating procedure.

Jason Moser (10:25):

I think maybe that to me feels like the biggest difference is that we at least have some idea of the power of the internet and how it’s changing our lives. And now we’re seeing a lot of great things being build on top of that internet. So perhaps that is, to me, the biggest difference that could maybe make this a little bit of a different period in time.

Clay Finck (10:45):

Plus, since the year 2000, there’s been 21 years of companies being built on top of the internet, and building the infrastructure around it. We’re going to be talking about Amazon. They’re just a prime example where they’ve just had this huge runway of being able to build this fulfillment network, building this network of merchants, bringing more and more customers year after year. They’ve just had this long runway of 21 years plus, of being able to build out that network and fully utilize the power of the internet.

Jason Moser (11:15):

Yeah. And all along the way, reselling you that Amazon is overvalued, it doesn’t make sense. It’s just, you’re crazy to invest in it, but the market isn’t stupid. Clearly, enough folks, enough investors out there saw that future, that were thinking forward enough to see the potential and give them a little runway there to make those investments. And it’s obviously paid off.

Clay Finck (11:36):

Outside of maybe a pricey stock market, what do you think are some of the challenges younger investors face today?

Jason Moser (11:43):

I think that for me, it feels like what we’re seeing at least, there is this idea or this gamifying of investing, which I understand the idea there, it’s an attention getter. It captures interest. To me though, there’s a danger there. And when you gamify it, you may be not necessarily seeing it for what it really is. These are your hard earned dollars being put to work. It’s your money. There’s nobody who should care any more about your money than you.

Jason Moser (12:10):

It’s very easy these days, particularly with the way money moves around, digitally, you just don’t feel the loss when you buy something anymore. You pay with PayPal or Venmo or whatever. You don’t have that physical handing over of something that you’ve worked so hard to earn. And so you don’t really necessarily feel that same loss.

Jason Moser (12:28):

I think that it’s awesome that investing has gone mobile and is so easy now. That’s what we want. But the risk that comes with that is this gamifying of investing and this short-term mentality. And now with sports betting and stuff coming online, that mentality I think continues to grow a little bit. I’m not criticizing sports gambling either. I bet on the NFL games every week, I’m not going to lie. It’s pure entertainment value for me. I’m not out there gambling anything that I can’t lose.

Jason Moser (12:57):

But then also I think just the general nature of social media and the meme stock movement, all of this stuff put together. The crypto space I think is one where it seems like there’s something there, but there’s also a lot of fear of missing out going on too. I think a lot of people are investing in things that they don’t know anything about.

Jason Moser (13:16):

And so that comes from this need it right now mentality that I think technology has enabled. I think all of that stuff is good, but there are risks that come with that. It’s certainly something for younger investors just to keep in mind.

Clay Finck (13:30):

I’m curious, what does your investment process look like? If have a company you want to start analyzing, what steps do you go through prior to purchasing for shares?

Jason Moser (13:41):

I try to keep investing as easy, as simple as possible. I’ve always said this, I think it’s as easy or as difficult as you want to make it. I know people that love to make investing just as difficult, and I don’t understand why they do it, but to each his own. I think investing, you can just keep it simple.

Jason Moser (13:55):

So for me, I try to reflect that in my process as well. And so I focus on finding companies that I can understand. I want to make sure there are large and/or growing market opportunities. I want to feel like I’m getting a leadership team that can get them there. And then I want a price that I can at least make sense of in some way. I’m not looking necessarily for a value, but I want to understand the financials, how they drive the business and what all is actually going into that stock price.

Jason Moser (14:19):

But what I do, my process here, whether it’s for one of my services or for myself is I will initially put together a two page report on the business. We’re lucky to have access to platforms like Cap IQ, where we can get endless information on businesses in their filing and whatnot, all in a nice, easy place.

Jason Moser (14:38):

I put together a two page report of business, what it does, what makes it special, what potential competitive advantages it may have. Financials, leadership, risks, any outside links, other sources, notes. And once I get that two pager put together, that to me is the initial investment of time, where I can then start to assess, you know what, this business makes sense. I want to keep on going. Or you know what, this business just doesn’t quite cut it for me. I don’t know that I fully get it. I’m going to take a pass.

Jason Moser (15:08):

If it’s one that I feel like I want to keep on going into, then I start going back through a few quarters of the earnings calls, look for investor presentations, and speak with other analysts who may know the company until I can ultimately formulate a final opinion.

Clay Finck (15:21):

Are there any big deal breakers that make it easy for you to narrow down the selection of your stocks?

Jason Moser (15:29):

The deal breakers that stand out to me the most first and foremost, it goes back to that investing mistake of just not knowing what you’re invested in. There are businesses where if I feel like I just have to invest a lot of time into fully understanding it, and then I still am not even really fully sure I understand it, to me, that’s an immediate deal… But there are a lot of opportunities out there. I think Buffet, I think is famous for saying something along the lines of, “There are no called strikes in investing.” You don’t like it, just leave it alone. There are a lot of great opportunities out there.

Jason Moser (15:57):

So that to me stands out as the biggest red flag, but then also just looking at the financials. And that’s even more difficult today I think because seven or eight years ago, it would’ve been far more critical of so many of these income statements and cash flow statements, because so many of these businesses, they’re not profitable. All these businesses are chalking up these massive losses.

Jason Moser (16:16):

So then you have to really look to that revenue line and get an idea of how they’re going to be able to grow that revenue line and where that profitability is going to come from. So it’s become a little bit more difficult in some cases than others, but certainly awful looking financials and not being able to connect the dots to a path to profitability if you need to in my mind, that’s a big red flag. I typically will just go ahead, take a pass.

Clay Finck (16:40):

Let’s talk about Amazon. I’m going to touch on some of the points you mentioned there with what you look for in a company. Amazon is a company that has piqued my interest as of late. The stock itself has for most part traded sideways since August 2020. That was after a significant run up after the COVID pandemic.

Clay Finck (17:00):

Now, everyone knows that Amazon is an online retailer, but today they’re just a massive company that’s grown so many legs for its business. Could you give us an overview of what else Amazon does outside being an online retailer?

Jason Moser (17:14):

You know obviously the online retail dynamic to the business and that’s what we all know, most people know about it. There’s the domestic, the US business and there is the international business. So you do have two different segments they focus on. It does feel like the international e-commerce business is really starting to gain traction as well.

Jason Moser (17:32):

A lot of those investments, it’s like the Amazon 2.0, I think. They’re basically taking the blueprint of what they’ve done here domestically, and then rolling that out on a global basis, it’s working well for them.

Jason Moser (17:45):

But the other side of the business that we focus on a lot these days is the Amazon Web Services, that’s what we call AWS. That’s essentially cloud computing. That is something that 10 years ago, I don’t think anyone really, I guarantee it, no one was accounting for that in their valuations and earnings models. That was a part of the business that really, we didn’t know a whole heck of a lot about 10 years ago. We clearly know a lot more about it today. It’s positioned in the market as the leader and the investments they continue to make. I think those are the three key parts of the business.

Jason Moser (18:16):

Now, within those parts of the business, you’ve got other dynamics at play. They’re developing a pretty robust little advertising business on the side there. And that to me continues to be something, I think that’s going to be a market they can continue to pursue and grow. It feels like they’re pursuing, becoming more an entertainment company.

Jason Moser (18:35):

They are making more investments in the Prime Video platform. I think the deal to buy MGM Studios will give them some valuable IP they can do things with.

Jason Moser (18:45):

I think the shipping and logistics side of the business too. That’s something a lot of people don’t really focus on, but that is just a massive market opportunity. We’re talking hundreds of billions of dollars, when we talk about just the greater shipping and logistics market. And they’ve got some pretty good intel on how to get things from point A to point B. They’re pretty good at it. I think that’s another side of the business that probably doesn’t get as much attention as it should.

Clay Finck (19:11):

You touched on a lot of points I would love to dig in deeper on. Let’s talk about profitability. It seems to me that Amazon is one of those stocks that seems somewhat obvious in retrospect, online retail, everyone’s shopping on their phones now, it’s much easier. You don’t have to drive to the store, park your car, find the product inside Walmart and wait in line. All these checkout lines, and Amazon just saves you so much time and it’s just so convenient.

Clay Finck (19:39):

But for whatever reason, it seems like a lot of people missed this investment, because Amazon just never looked like they were profitable. But in my opinion, the reasoning I would think people maybe missed it is because they just continually reinvested in the business for many, many years, and just kept that long-term focus, because they just continually reinvested and built out their network and tried to attract more customers.

Clay Finck (20:04):

And given that, do you have any advice for what investors should look for to find similar companies that are reinvesting with that long-term focus?

Jason Moser (20:14):

I think that’s a really good point there. Amazon has never, ever, I don’t think ever looked reasonably valued, conventionally speaking. That’s always been the criticism is of the valuation doesn’t make sense. Now it makes a little bit more sense, because they obviously can generate some meaningful profits, but I have owned Amazon shares for better than 10 years now. The stock is up 2000% or something that.

Jason Moser (20:35):

In the entire time, it’s been quote-unquote overvalued. And frankly, in the earlier days, there was certainly some validity to that based on conventional views. But I think you view it from much more of a qualitative perspective. That’s what we really try to focus on doing as investors at the Fool is focus on the qualitative as much as the quantitative.

Jason Moser (20:57):

And I think for me, one of the dead giveaways, there was a time where it felt like the market at large would hold it against businesses reinvesting as opposed to buying back shares or paying dividends. But I think also there was a stretch of time there where there was a lot we didn’t know about the power of the internet. Going back to the people putting their credit card number into the computer and buying something was a novel concept. And no one thought that would happen. Now, we’re banking on our phones.

Jason Moser (21:24):

To me though, the dead giveaway for Amazon, and I highly recommend folks do this if they have, and if you go back and you just read Jeff Bezos’s letters to shareholders, just google Amazon investor relations, and you can find them all right there. They go back 20 plus years now. If you read those letters to shareholders, it’s abundantly clear what he’s doing. He’s explicitly telling you, “I am going to reinvest all this money back in this business. This is what we’re trying to do. It’s going to be a long journey. It’s going to take time. You need to be patient with us.”

Jason Moser (21:55):

So if you had read those letters back then, it would’ve been obvious. Then you could say, “I want to be along for this ride,” or, “No, this is just not for me.” You could make a decision, but the information was right there. So I think oftentimes just digging into leadership, finding if they have letters to shareholders, reading those, getting a better grip on the perspective of management and what they’re actually trying to do, can definitely be very helpful, because sometimes that information is right there. You just got to dig for it.

Clay Finck (22:25):

In preparation for this interview with you, I did take a look at the 2020 shareholder letter, and that was Jeff Bezos’s last letter. He linked in the 1997 letter as well that he wrote to shareholders, and it’s pretty interesting to see how he had that long-term focus from then.

Clay Finck (22:42):

I was looking at some of the numbers and they had something like 500% growth. I don’t know if it was customers or revenue, it was an insane number in 1997. He just focused on that long-term perspective, which reminds me of that Warren Buffet approach. He wants to focus on long-term shareholders and have their best interests in mind and act in their best interest.

Jason Moser (23:03):

Yeah. And I think in addition to that, it’s just holding management accountable. Ultimately, is management doing what they say they’re going to do? And so with Bezos, for example, all along the way, he just consistently was doing what he said he was going to do. There weren’t really any surprises. He did what he said he was going to do.

Jason Moser (23:21):

And so we knew that was what we were in for as shareholders. When you can find management that has a track record of consistency, of just doing what they say they’re going to do, I think Buffet’s another great example. He’s always stuck to his guns and stuck to his knitting. You know what you’re getting into when you saddle up with those guys.

Jason Moser (23:36):

I think when you find leadership just consistently does what they say they’re going to do, and doesn’t necessarily bend the knee to Wall Street’s short-term expectations, trying to hit those quarterly targets, that can be powerful over time.

Clay Finck (23:48):

So you mentioned the importance of management, and Jeff Bezos recently stepped down as CEO. And I believe it’s Andy Jassy that took his place. What do you think of that transition? Do you think they’re well positioned to continue the growth that they’ve had?

Jason Moser (24:03):

Yeah. I think that Andy Jassy was the right guy for the job. It feels like his experience with the AWS side of the business, his experience with the company, his experience working with Jeff Bezos, to me, it just seemed like a good transition. Now, time is going to tell. We are going to have to actually wait and see if he can deliver.

Jason Moser (24:21):

The good news is I think a lot of the heavy lifting has been done, which should make his job in a sense a little bit easier. But it’s obviously still a very difficult job, but I would say I’m cautiously optimistic that Andy Jassy is positioning this company to continue to do well for many years to come.

Clay Finck (24:37):

Yeah. And it’s also worth mentioning that Bezos is also remaining on the board, so he’ll still be very involved with the company, I’m sure.

Jason Moser (24:45):

You’d be concerned if he goes in there, he starts blowing things up. Right? You start changing materially the way they do things, then you have to start asking yourself, “Well, what are you doing and why are you doing it?” That would be certainly a red flag. I’m not saying that would mean you want to go ahead and sell Amazon, but it’s definitely something to keep an eye on. Is he making meaningful changes? And if so, why? Because it feels like what they’ve been doing today’s been working pretty well.

Clay Finck (25:09):

We’ve talked about all of the other businesses that Amazon has grown over the years. And like you alluded to, no one in the year 1997 projected AWS to produce 45 billion in revenue for them, since that business didn’t even exist yet. In large part, Amazon’s success is due to management recognizing the opportunities to grow new legs for the business and executing on them.

Clay Finck (25:32):

And as you know, the quality of the management is a very qualitative factor. It’s very difficult to quantify the value of having Jeff Bezos as your CEO for 20 plus years.

Jason Moser (25:44):

It’s squishy, in that I mean judging leadership is very difficult because it’s so squishy. It’s so subjective. I think all along the way, one of the dead giveaways for Bezos was just the stake that he held and continues to hold in the company. You love to see leadership with big time stakes like that, because their success is tied to the success of the business. That’s another thing to watch out for.

Clay Finck (26:06):

Outside of the online retail business, where do you see the most potential for growth in their existing businesses?

Jason Moser (26:12):

Yeah, I think the cloud business, the AWS business is the most obvious answer there. That is a very important dynamic to Amazon’s overall business at this point. Just to put that in context, you look at this most recent quarter that they just reported and AWS segment was responsible for somewhere in the neighborhood, 14 percent-ish of total revenue, but it was ostensibly all of the company’s operating income. So it’s the most profitable side of the business right now. And that probably remains that way for the foreseeable future.

Jason Moser (26:46):

I think the focus on AWS is a good one. I think that’s a really, that’s reason enough to want to own this business. But then I think also you look at some of those other little opportunities that are starting to really develop. If you look on their financials, they break down their sales, the online storage, physical stores, subscription services, third-party services. They have then AWS, but then they add this other little line item, other, and most of that is the advertising business. Essentially I think all of it is.

Jason Moser (27:16):

But if you look at that, just the most recent quarter, that other line item there was responsible for just over $8 billion in revenue for the quarter. That was up 50% from the year ago. Amazon’s so big now. Obviously, $8 billion for the quarter doesn’t sound like it means a whole heck of a lot for a business that is pulling in hundreds of billions of dollars at the snap of a finger.

Jason Moser (27:41):

But I do think that advertising business is starting to grow some legs there, and given the nature of the business, the advertising model fits quite nicely into their e-commerce business. So, beyond the cloud, I think advertising is a pretty cool little dynamic to Amazon that flies under the radar for most.

Clay Finck (27:58):

So is that advertising piece primarily stuff that’s on the Amazon website?

Jason Moser (28:03):

Yes. Most of that is what you’re going to find on their app or their site. A lot of brands will promote their brands to get it at the top of the feed. So if you go in there and you search for toilet paper or whatever it may be, brands are going to pay for that advertising. That certainly can be very powerful.

Clay Finck (28:25):

Yeah. That makes sense. They own that digital real estate. And you can just think of Facebook and the amount of advertising revenue they’re able to generate, and that’s the majority of Facebook’s revenue. It’s just a tiny portion of what Amazon’s got today.

Jason Moser (28:37):

Yeah. And also just to the entertainment dynamic of the business too, the Fire TV device and the entertainment video platforms that they’ve developed, what they’re doing in regard to music, podcasts, all of those put together, they’re advertising channels and ways for Amazon to continue to monetize what’s become just a massive network.

Clay Finck (28:57):

Yeah. I want to dive deeper into that as well. It seems that all these tech companies have some sort of monopoly on an industry, and it just becomes so entrenched in people’s lives that it’s just so difficult for competitors to disrupt. And Amazon specifically has built a network effect around that online retail space, that only seems to get stronger over time.

Clay Finck (29:17):

They find a way to attract customers, and that brings in more merchants that want to sell on the platform, which makes the platform more valuable, which brings on more customers. It’s just a virtuous cycle of growth that we’ve seen. And then throw on the fulfillment network they have and how they’re able to deliver items cheaper than their competitors, at a faster pace as well. I, myself buy many things on Amazon because I know they’re able to provide a good price and they can deliver it right to my doorstep for free. How does it get any better than that?

Jason Moser (29:48):

They have done a very, very good job in reshuffling our values as consumers. And the role that convenience plays now is far more important than the role it played before, because really you didn’t really have the option back then. You had to go to the store to get it. You had to drive to the mall to get it.

Jason Moser (30:07):

Now you have the options. You can go to the mall to get it if you want, or you can just order it from Amazon and have it delivered. Most of the time for free, if you’re a Prime member like we are. Prime is just a cost of living for us in this household. I have a hard time believing we’ll never not be Prime, but it’s just given consumers a new way to value their time. I think that’s going to continue to be the key to its success.

Jason Moser (30:29):

Now, I will say, I think, I don’t want to say the low hanging fruit on the domestic commerce market has already been picked for Amazon, but it is now becoming a much, much more competitive market. If you look at a company, I’m sure a lot of folks out there are familiar with Shopify, their most recent quarterly call, they had a slide in their investor deck where they showed the US e-commerce landscape in 2020, the US e-commerce market share.

Jason Moser (30:56):

In that slide, you could see Amazon was just the leader by far, a 39% or something share. Shopify was in second place at around 9%. But I think it’s interesting to watch what Shopify is doing. And for transparency, I’m a fan of Shopify. I own shares of Shopify myself as well, but you’re seeing investments that Shopify is making. I think even further into fulfillment, they’re investing now in building out fulfillment. It’s just amazing to see.

Jason Moser (31:24):

And the market seems to be giving Shopify that same wiggle room that it gave Amazon so many years ago. And probably a lot of that has to do with just the fact that the market opportunity they’re pursuing is so large. But you also have a lot of similarities there in leadership with Shopify and ownership stakes and things like that. So it has been fascinating to watch. I think even more fascinating to see another opportunity in something like Shopify, that really, it really rhymes with what Amazon did so many years ago.

Clay Finck (31:55):

You bring up Shopify. So let’s shift gears a little bit to the risks for Amazon. Outside of the competitive risk of Shopify potentially taking market share, what are the biggest risks you see as an investor in Amazon, outside of that?

Jason Moser (32:09):

It’s a fairly stable company at this point. I don’t think, this is not a company where you feel like they’re balancing on the precipice of profitability and losses. This is a established business now. And you mentioned it earlier, it’s so big, I think regulators are always going to be a challenge. I think that’s going to be something they’re going to continue to pay attention to these big companies, Amazon Facebook, Alphabet. That’s just going to be an ongoing risk I think for these businesses.

Jason Moser (32:33):

Amazon does a lot, what it is we’ve talked about. So if you remember that Peter Lynch term, diworsification, basically just pursuing too many ancillary opportunities, and not really doing it well. You’re making your business worse in pursuing these other opportunities. I feel like they’re executing on the opportunities they’re pursuing, but there’s always the possibility of diworsification with a business like this.

Jason Moser (32:57):

And then back to Andy Jassy, I don’t know that I consider that a risk. I think it’s an unknown, it’s a bit of an uncertainty. I think I feel really good about it as a leader there, but we’re going to have to watch him develop a track record as CEO of the business. Those are the things I think that stand out to me the most these days.

Clay Finck (33:14):

The US government’s role and how they might regulate or crack down on them also came to mind for me. But I’m not sure if it’s quite as big of a risk for Amazon as it is for maybe some of the other big tech companies. They don’t seem as big of a monopoly as say Google, where they own the entire search market. Would you agree with that assessment?

Jason Moser (33:33):

I think you’re right. When you look at something like a Google or a Facebook, they stand out more as really being the owners of that market. I think from Amazon’s perspective, they ought to feel really good about the competitive landscape in retail and in cloud computing. I think they ought to feel really good about having so much competition out there. Because that does I think maybe give regulators a bit of another area to focus on. Maybe they focus a little bit more on the more obvious suspects like your Alphabets and Facebooks of the world.

Jason Moser (34:02):

I think it’s just going to be difficult for these businesses for the most part going forward, more from the acquisition side of things. An unrelated business, but we certainly saw regulators really give it a close look, I remember when Visa wanted to buy Plaid. It took a little while, but there were enough concerns and questions from regulators. They went ahead and bagged that deal.

Jason Moser (34:22):

I think that for these companies to acquire going forward is going to be more of a challenge. But I feel like Apple and Amazon are probably, if you had to rank Facebook and Google and Alphabet or Facebook and Alphabet and Amazon and Apple and where the antitrust focus is the most, I feel like you’d put Amazon an Apple on the bottom half of that list, which is going to be a better thing for them.

Clay Finck (34:48):

I also can’t help but think about the supply chain issues, as well as the labor shortage, as troubles that they might run into going forward and when those issues might subside. And it’s largely an issue that’s out of their control. I believe Amazon, they employ over a million people or something. So there’s only so many people out there that are able to be employed by them.

Jason Moser (35:11):

And they’re automating that workforce too. Rise of the machines, as we like to joke about at work. They are certainly automating that workforce, which is something to keep in mind. In theory, that’s like the self-driving car idea that should ultimately result in some fair profitability down the line. But I guess we’ll have to wait and see.

Clay Finck (35:30):

A lot of Amazon’s business seems to rhyme with Tesla. For years, people have said that Tesla’s stock is overvalued as well, yet it’s still one of the best performers as of late. They’re both utilizing automation and AI in their businesses. And the CEO has such a key role in both of the companies’ success.

Clay Finck (35:49):

I’d like to transition to valuation now. How do you think of the valuation of Amazon?

Jason Moser (35:54):

Short answer, not a lot. I don’t mean to sound so dismissive of it, but I do go back to, I’m probably a little bit biased in that I’ve been a shareholder of Amazon for so long, even 11 years ago, I was being told this is just way overvalued. It makes no sense. And that probably is a bit more valid then, than it is today, because we’ve seen what the business has grown into.

Jason Moser (36:16):

I think today, you look at the way the market is looking at these big tech companies. You’ve got Amazon trading somewhere around 65 times earnings. You’ve got Facebook trading around 24 times. Alphabet trading around 28 times, Microsoft 37 times. So clearly, the market is looking at Amazon with a little bit more optimism, I guess. They’re looking at all of these businesses with optimism, but maybe I’m just giving Amazon a little bit of a higher multiple, and that could be for a number of different reasons.

Jason Moser (36:44):

I tend to believe though that it makes sense, because we’ve talked before about these multiple revenue drivers. These are all businesses that have a few different ways they make money, but fundamentally, Alphabet and Facebook, those are advertising businesses. That’s what they are. That’s how they make their money.

Jason Moser (37:01):

Microsoft, a little bit different there, that’s a software company that’s well entrenched in its market and pretty reliable. Amazon’s got a number of different revenue drivers that we’ve discussed today. I think that’s one of the reasons for the optimism, is because not only are they so well established in this massive and resilient e-commerce space, but now they’re pursuing all of these other options that are going to give them diversification in their revenue streams, added profitability.

Jason Moser (37:30):

We’ve seen how meaningful the cloud business is to the bottom line. Look at things like their advertising business, their entertainment business, shipping and logistics. It goes on and you start to add those numbers up and you realize the market opportunity they’re pursuing is just so big, that that’s really more of the way I view it. I’ve never really looked at Amazon and thought, “Well, it just doesn’t look like a very good value.”

Jason Moser (37:54):

I will say, I think that as always, you want to look forward and try to figure out, does today’s price give me a reasonable shot at some growth? I think that with a business like this at 65 times earnings, I’m not sitting there and telling you it’s cheap, but I think when you consider the qualitative aspects of the business, that valuation starts to look a little bit more reasonable.

Jason Moser (38:19):

I have a hard time imagining if you bought Amazon shares today that in five years they wouldn’t be worth more.

Clay Finck (38:25):

Yeah. I agree that they still seem to have that long-term perspective in mind. So the 65 times earnings that you mentioned shouldn’t have much weight on it, because those earnings, they aren’t optimizing for earnings today. They’re optimizing for long-term shareholder growth.

Jason Moser (38:43):

Precisely. That’s exactly it. That, I think is what makes this such a fun investment to continue to own is they don’t play that game. They’re playing a different game. And as long as you can understand that, you mentioned Musk and Tesla. I just sat on the sidelines and watched that one unfold. It’s just been entertaining to me from a number of angles. I’m not a share owner of Tesla, but I feel like there are some similarities there. And you just have to understand the game that they’re playing. And if you want to be a part of it, fine, if not, fine. But they’re clearly not playing for hitting that quarterly target that so many analysts on Wall Street are married to.

Clay Finck (39:23):

Now, Amazon, at the time of this recording, sitting at around a 1.7 trillion valuation. Do you see very much potential upside? I’m assuming your answer is yes.

Jason Moser (39:33):

Oh, yeah, sure. The market capitalization is just the share price times how many shares are outstanding. But I think really when you look at the way they continue to grow that top line, you got to feel like the future is still very bright. The last 12 months, they reported close to 460 billion in sales. And that is, just when you think about it, that’s just phenomenal. That’s something that also really should continue to grow, given the number of opportunities they’re pursuing. The e-commerce space is just resilient. Repeat sales. You got to love it.

Jason Moser (40:05):

I think they’re always going to be able to rely on that Prime membership. You look at businesses like Costco. I think another great example of just how powerful that membership model can be, if you have a customer centric focus. Amazon, that has always been their MO, really. They want to be the most customer centric company on the face of the earth. That’s what they say.

Jason Moser (40:24):

When you have a business, when you have leadership that is so focused on the customer, I’m not saying it’s always going to be perfect. They make mistakes just like the rest of us. But that I think really is something that’ll continue to drive this business. Bezos has always talked about is his healthy fear of the competition and of the consumer, always waking up the next day and deciding to buy their stuff from somewhere else. I think that’s why he continues to steer this business in this many different directions.

Clay Finck (40:51):

I myself find it interesting to compare the stock movements of these FANG companies, and maybe how their revenue’s growing, how they’re producing shareholder value. And one item I wanted touch on before we close out the show was share buybacks. Companies like Apple has had tremendous share buyback programs, and in 2020 alone, they had $70 billion in share buybacks. And that just drives the share count down, and it drives the earnings per share up.

Clay Finck (41:22):

And while Amazon, to my knowledge, their share count has been increasing. So, not only have they not been buying back shares, they’ve been issuing shares to raise more money to reinvest in their business. I was curious, do you think Amazon could use their profits in the future to buy back shares to drive the share price higher? Or is that something you even think about when investing?

Jason Moser (41:45):

I absolutely think they can at some point. I wouldn’t look at Amazon, in looking at this and the investment case today, I wouldn’t look at share repurchases as something that would drive value. That wouldn’t go into my calculus, so to speak. Whereas if I’m buying a company like Apple or a company like Visa or Mastercard, I think are a couple of very good examples, they’ve explicitly stated, part of their offer to shareholders is to continue returning value in the form of dividends and share repurchases.

Jason Moser (42:16):

I think there may be a time down the road where leadership feels like, you know what, we’ve exhausted all of our ideas. We feel like this business has hit its peak. We’re where we wanted to go and not really sure what else to pursue. And so maybe they decide to start returning value to shareholders by instituting a dividend or repurchasing shares.

Jason Moser (42:37):

But I think, even as big as it is today, this is clearly a growth story. I wouldn’t sweat the share repurchases at this time.

Clay Finck (42:46):

It’s really incredible to think at 1.7 trillion market cap and how long the company’s been around, they’re still in growth mode.

Jason Moser (42:53):

It is impressive to think about. And one thing to keep in mind too, is I mentioned they brought in $460 billion in sales over the last 12 months. I know that sounds like a lot, because it is, but for context, Walmart trailing 12 month, they brought in $566 billion. Walmart has made more money in revenue over the last 12 months than Amazon. So that just gives you an idea at least of the opportunity that’s out there.

Jason Moser (43:20):

And you see companies like Walmart now playing a little bit more defense, and trying to establish their own membership programs. We’ll see how that shakes out. But it just goes back to when you see how big of an opportunity that is out there, and when you think Amazon is the king of the jungle, Walmart brought in more on sales. That’s a fact. It’s worth keeping in mind.

Clay Finck (43:43):

Yeah. Amazon’s going to do everything they can to fend off all the competitions going towards e-commerce.

Jason Moser (43:50):

Yeah. And as far as I know, Walmart doesn’t really have the same presence in something like cloud computing. Maybe they make a little money on advertising. I know they’re trying to diversify their revenue streams now, which I think is a good thing. I think Walmart benefits from a massive network all over the world as well, but they are starting to copy some of the things that Amazon has done, because it’s worked so well.

Clay Finck (44:09):

And to give the audience some context, 10 years ago, the e-commerce sales as a percent total retail sales was only 4%. And today, that number’s still only at 13%. So just seeing those numbers alone makes me think there’s still a lot of growth left when it comes to the e-commerce market.

Jason Moser (44:29):

There’s absolutely no question about it.

Clay Finck (44:31):

Jason, thank you so much for coming onto the show. I really can’t thank you enough. I really enjoyed our conversation and really appreciate you being so giving of your time for our audience. Where can the members of the audience go to connect with you and learn more about you?

Jason Moser (44:47):

Well, Clay, I enjoyed it too. Thanks so much for having me. It’s always a pleasure to join you guys. And like investing, I keep it pretty simple. If you want to find me, you can find me on Twitter at TMFJO. Reach out to me there and let’s talk shop.

Clay Finck (45:00):

Fantastic. We’ll be sure to link those in the show notes. Jason, thanks a lot.

Jason Moser (45:05):

Yes, sir. Thank you.

Clay Finck (45:07):

All right, everybody. I hope you enjoyed today’s episode. Please go ahead and follow us on your favorite podcast app, so you can get these episodes delivered automatically. And if you haven’t already done so, be sure to check out our website, theinvestorspodcast.com. There, you’ll find all of our episodes, some educational resources we have, as well as some tools you can use as an investor. And with that, we’ll see you again next time.

Outro (45:30):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin. And every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.