We recently published a list of 15 Best Stocks to Buy According to Hosking Partners. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other best stocks to buy according to Hosking Partners.
Hosking Partners was established in 2013 by Jeremy Hosking as an independent partnership that offers a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking employing a capital cycle approach to investing. It has a diverse set of stocks in its portfolio that belong to a variety of industries consisting of AI, shipping, and financial services, among others. Jeremy Hosking earned an MA from the University of Cambridge, after which he served Marathon Asset Management 26 years as a founding partner and lead portfolio manager. There he contributed to developing the capital cycle approach to investment.
In its recent blog about shipping, Hosking Partners believes that understanding the cycles in different classes of shipping and global trends is essential for successful investment in the industry. Currently, Shipping (covering the container, dry bulk, product tanker and LNG sub-sectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010 caused by deglobalization, accelerated by the COVID-19 pandemic and geopolitical instability from the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping by enabling cross-border trade.
Furthermore, shipping is a significant emitter of CO2, accounting for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty over future fuel technology deters investment in new ships, leading to a tighter supply. The industry’s efficiency, measured by emissions per tonne-km, remains high compared to other transport modes. The shipping industry is at a pivotal juncture, with significant transformations driven by AI, the energy transition, and ESG considerations.
Another industry that Hosking Partners talks about is copper mining. Copper is often seen as a barometer for economic health and is crucial for the energy transition, including electric vehicles, power grids, and wind turbines. Wall Street banks are optimistic about copper prices, forecasting significant gains. Citi analysts suggest that prices could surge to over $15,000 per ton in the next 2-3 years if a strong economic recovery occurs, while their base case projects a rise to $12,000 per ton with modest demand growth through 2025 and 2026. Bank of America has also increased its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand driven by the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct, and if supply issues persist, demand may adjust, potentially leading to lower prices. Hamilton suggests that while high price targets might be temporarily achievable, adjustments in demand could follow. The market may see a modest surplus due to increased mined supply, which is projected to grow by 4-4.5%. This is largely driven by new greenfield and brownfield projects. Despite the near-term surplus, long-term scarcity is anticipated as regulatory and political challenges in South America could impede the development of new mines.
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Amazon.com, Inc. (NASDAQ:AMZN)
Hosking Partners’ Stake Value: $93,446,617
Percentage of Hosking Partners’ 13F Portfolio: 3.45%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is strengthening its leadership in AI, driven by its AWS business, which achieved over 37% operating margins in Q1 and has consistently exceeded 30% for the past five quarters. Amazon’s first-quarter revenue grew by 12.5% year-over-year, and its adjusted EPS more than tripled. JPMorgan reiterated its Overweight rating on Amazon with a price target of $240, following an analysis of the U.S. e-commerce market. The research indicates that Amazon is on track to surpass Walmart as the largest U.S. retailer by 2024, with long-term e-commerce penetration potentially exceeding 40%.
This stock is highly favored by customers due to its extensive diversification in AI and cloud computing, making its products and services top choices among cloud users. During Amazon.com, Inc.’s (NASDAQ:AMZN) Q2 2024 earnings call, CEO Andy Jassy highlighted the rapid growth of the company’s AI business, driven by Amazon’s belief that no single AI tool can dominate the market. As a result, Amazon offers a wide range of AI tools, ensuring that developers and consumers can find the best fit for their needs.
The company’s impressive growth and rising investor interest are also fueled by the profitability of its Amazon Web Services (AWS) business. The increasing demand for AWS, particularly due to Amazon’s investments in generative AI projects, led to an 18.8% year-over-year increase in AWS revenue in the second quarter.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
Overall AMZN ranks 3rd on our list of the best stocks to buy according to Hosking Partners. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that 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.