We recently compiled a list of the 10 Best Stocks to Buy According to Eminence Capital’s Ricky Sandler. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other stocks.
Investing prowess runs in Ricky Sandler’s family. The manager of prominent hedge fund Eminence Capital had a 13F portfolio worth more than $7 billion at the end of the first quarter of 2024. His father was a research analyst at Goldman Sachs, one of the premier investment banks in the world, and later went on to manage a hedge fund. Sandler has had a somewhat similar career trajectory, beginning as a research associate for Mark Asset Management before making his name as a hedge fund manager at Fusion Capital Management. In 1999, Sandler founded Eminence Capital, growing the small fund into a multi-billion dollar investment firm over the course of two decades. The fund focuses on uncovering value in the market through fundamental research, an art that seems to be dying on Wall Street as fast money schemes become more popular.
The investing philosophy of Sandler has been influenced by his work at Mark Asset Management and Fusion Capital Management. At the former, Sandler learned the importance of focusing on a bottom-up research strategy aimed at picking great businesses. At the latter, Sandler learned that investing in good businesses was not enough. In order to create wealth, money managers had a duty to invest in great businesses at value prices, thereby creating room for future growth. Sandler calls this the “quality value” approach to investing. He made these comments in an appearance on the Equity Mates podcast last year. Sandler, in remarks made during the podcast, stressed that investors should not only buy at good prices but should also not stay invested in equities when they become too expensive. Young investors would do well to pick up on this simple yet effective tip.
At Eminence Capital, Sandler has developed a long-short equity strategy that has paid huge dividends for clients. Per the hedge fund manager, the Asian debt crisis in the late 1990s was one of the formative events in his life that led him to understand the value of an effective shorting strategy. During the crisis, the International Monetary Fund had to pump in more than $40 billion into large economies in East Asia to contain the spread of the meltdown to the world economy. The company Sandler was a part of at the time owned stakes in many mid-cap Asian firms that were hit particularly hard by the crisis, leading to huge losses for his fund. Sandler now makes sure that his stock pickers spend at least half of their time developing individual stock shorts, a strategy that aims to build up the defenses of his fund should the market take a turn for the worst.
Sandler believes that in the present economic environment, only investors that have valuation discipline and short selling skills will be able to keep pace with the changing dynamics of the stock market. However, he also underlines that long bets remain equally important. The New York-based manager outlines his long investing philosophy as owning mispriced stocks that have the potential to take a turn for the better in the coming two or three years. Sandler emphasizes the importance of investing in ownable companies — businesses that he describes are well-positioned competitively, sound structurally with trusted management teams, and able to generate solid cash flows. Sandler urges money managers to invest only in firms that they would be comfortable investing in for their family portfolio. A look at the top picks in his latest 13F portfolio illustrates this strategy in action.
Our Methodology
For this article, we scanned the stock portfolio of Eminence Capital according to the 13F filings submitted at the end of the first quarter of 2024. We selected the top 10 stocks from this portfolio. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com, Inc. (NASDAQ:AMZN) CALL
Number of Hedge Fund Holders: 302
Eminence Capital’s Stake: $229,623,740
Amazon.com, Inc. (NASDAQ:AMZN) is a diversified technology firm with core interests in ecommerce. The value proposition of the stock can be understood by looking at a few key financial metrics and strategic moves made public by the firm over the past few months. Over the last twelve months, the company has generated earnings per share of $3.57. This value is expected to grow by 23% in the coming year, from $4.72 to $5.80 per share. This gives the stock plenty of room for growth and seems consistent with the Sandler strategy of buying good companies at value prices.
Amazon.com, Inc. (NASDAQ:AMZN) is investing heavily in expanding AWS infrastructure and capabilities, with plans to launch new regions and data centers, indicating long-term growth prospects and a commitment to maintaining a competitive edge. The ongoing innovation in AI and cloud services, exemplified by new AWS capabilities and customer adoption, positions the firm favorably in rapidly growing tech sectors
In a recent investor letter, Lakehouse Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) delivered an impressive quarterly result that also came in well ahead of analyst expectations. Net sales increased 13% year-on-year to $143.3 billion and operating profits increased 219% year-on-year to $15.3 billion (vs the high end of guidance at $12.0 billion). As has been the case for several quarters now, the highlight of the result was the significant improvement in profitability metrics, as management continues to drive cost efficiencies across its retail operations and Amazon Web Services (AWS). Amazon delivered to Prime members at its fastest speeds ever. In March, across the top 60 largest U.S. metro areas, nearly 60% of Prime member orders arrived the same or next day, and in London, Tokyo, and Toronto, 3 out of 4 items were delivered the same or next day. Bigger picture, we continue to believe that the market underestimates the length of the runway ahead in the core retail business (note that e-commerce sales in the U.S. still only make up 15% of total retail sales) and that there is still significant margin expansion ahead as scale and efficiency benefits continue to come through.”
Overall AMZN ranks 6th on our list of the best stocks to buy according to Eminence Capital’s Ricky Sandler. You can visit 10 Best Stocks to Buy According to Eminence Capital’s Ricky Sandler to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of 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 timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.