My Top 2 Stocks: Amazon.com Inc. (AMZN) and Google Inc (GOOG)

The beginning of my investing experience is somewhat of a blur. Being an English major in college and a writing teacher by profession, I didn’t have much experience with finance, let alone stocks, at all. When I finally got interested — after finding the Fool to help me invest my retirement funds — my method was pretty haphazard.

It wasn’t until the Spring of 2010 that I finally started to realize the importance of developing an investment philosophy. After spending a lot of time reading about it, I decided that it would be best to have a concentrated portfolio with stocks that 1. displayed innovation, and 2. had huge sustainable advantages over the competition.

After diving through all the possibilities, I was able to make some bets I was confident in. As it stands now, my two top holdings in absolute dollars are prime examples of businesses with wide moats and innovative employees. Those two companies are Amazon.com Inc. (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOG) .

Netflix, Inc. (NASDAQ:NFLX) was actually a guide
While studying about sustainable competitive advantages, I remembered reading about how Netflix was able to fend off Wal-Mart Stores, Inc. (NYSE:WMT) when the latter wanted a piece of the DVD-to-consumer business.

In a story that’s not told too often, Netflix had a huge tactical advantage over Wal-Mart: the company had strategically placed its fulfillment centers within a stone’s throw of local U.S. Postal Service offices. Though that might seem like a small thing, the Wal-Mart’s DVD distribution centers were far fewer, and the turnaround time — as well as some special treatment for Netflix by the USPS — made a big difference in user experience.

Obviously, when streaming became the new paradigm, that changed things a bit for Netflix. But it got me thinking about the huge infrastructure that Amazon.com, Inc. (NASDAQ:AMZN) has. Currently, only about 10% of all purchases are made online in America. Though that number will never reach 100%, it shows how much room there is for growth.

As e-commerce becomes more commonplace, customer service will be a key differentiator in deciding who wins the most customers. Currently, Amazon.com, Inc. (NASDAQ:AMZN) and its subsidiaries currently have over 69 fulfillment centers in the world, and the company has started locating them near urban centers. This insures that when Amazon customers hit “Buy,” they’ll be getting their products delivered to their doors faster than with anyone else.

When you consider the astronomical price the company is paying to build, staff, and automate these centers, you get an idea for how it would be nearly impossible for a competitor to come in and offer better customer service. Throw in the innovation factor — remember, the company invented the e-reader — you’ve got a recipe for success.

Currently, Amazon.com, Inc. (NASDAQ:AMZN) comprises 12.2% of all my real-life stock holdings, and is beating the market by a healthy 30%. Though I think every investor should own a piece of Amazon, I would suggest buying in stages, as today’s prices are quite high by most standard metrics.