1. Amazon.com Inc. (NASDAQ:AMZN)
10-Year Revenue CAGR: 21.95%
Number of Hedge Fund Holders: 286
Amazon.com Inc. (NASDAQ:AMZN) is a technology company that has evolved from an online bookstore to a diversified conglomerate. Its core businesses include e-commerce, where it operates an online marketplace, along with cloud computing through Amazon Web Services (AWS), which provides a suite of services to businesses and individuals. It also offers digital streaming services and has expanded into areas like AI, advertising, and physical retail.
During Q3 2024, AWS led the charge in profitability, contributing $10.4 billion to the company’s total operating income of $17.4 billion. Its management team is focused on strengthening its cloud offerings through strategic customer-centric initiatives. A recent example is the launch of the Oracle Database@AWS service, which enables customers to migrate their Oracle workloads to AWS infrastructure with minimal modifications.
Amazon.com Inc. (NASDAQ:AMZN) also partnered with Databricks, a leader in data analytics and AI, to accelerate the development of custom AI models using Databricks Mosaic AI on AWS. These efforts are further complemented by signed agreements with major corporations like Booking.com, Capital One, and Sony. Due to the growth of its cloud computing division (AWS), the company is positioned for continued long-term success.
Despite near-term stock price weakness in the company, Montaka Global Investments strategically increased its holdings, recognizing its substantial long-term upside potential compared to other holdings in its portfolio. Montaka Global Investments stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2024 investor letter:
“Secondly, in August, we sold some of our holdings in two tactical positions in the tail of Montaka’s portfolio – Advanced Micro Devices (AMD) and Kyndryl Holdings (KD) – to take advantage of a near-20% drawdown in the stock price of Amazon.com, Inc. (NASDAQ:AMZN).
We still see plenty of upside in AMD and KD, but Amazon has more substantial and higher-probability upside that demanded we allocate even more of Montaka’s capital to the online retailer.
Investment opportunities always compete for capital. Through this lens, Montaka’s largest investments act as a kind of ‘benchmark’: Any new investment must be more attractive than these holdings to get included in our portfolio.
Because we believe Montaka’s largest investments remain so attractive, our annualized portfolio turnover has been low for many years now – typically around 25%.
We continually identify quality global businesses with upside potential – but few new investment opportunities have greater upside than Montaka’s existing portfolio investments.
While Montaka is focused on investing over the long term, and most days don’t require any action on our part, paradoxically we need to be agile on a daily basis. That is, we must be ready to act if stock price changes throw up attractive investment opportunities.”
While we acknowledge the growth potential of Amazon.com Inc. (NASDAQ:AMZN), our conviction lies in the belief that AI stocks hold great promise for delivering high 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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