In this article, we discuss the 5 stocks that Ken Griffin’s Citadel is piling into. If you want to skip our analysis of these stocks, go directly to Ken Griffin’s Citadel Is Piling Into These 10 Stocks.
5. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 279
Percentage Increase in Stake During Q4: 283%
Amazon.com, Inc. (NASDAQ:AMZN) is a diversified technology company. Major hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN) with 4.1 million shares worth more than $13.9 billion.
According to the latest 13F filings, Citadel owned 317,175 shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of December 2021 worth $1 billion, representing 0.21% of the portfolio. The company has been in the Citadel portfolio since late 2010.
In its Q1 2021 investor letter, Hayden 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):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon.com, Inc. (NASDAQ:AMZN), we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon.com, Inc. (NASDAQ:AMZN) is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”(read the entire letter here)
