Displaying items by tag: Amazon
Talk about comments coming right from the source. Microsoft CEO Satya Nadella went on the record this week telling the market that tech companies should “expect” regulation. Nadella walked through current areas of tech and regulations, like facial recognition or GDPR, and explained their implications for the industry. He said that “As tech becomes more and more pervasive, I think for all of us in the tech industry we should expect—whether it’s on privacy or on cybersecurity or even ethics or AI—government and regulatory bodies to take interest in it”.
FINSUM: We think the writing is on the wall that tech is going to face some form of regulation, especially given that the Trump administration is rather hard on the sector. The question is when, not if.
2017 was a terrible year for the retail sector. It was nothing short of an apocalypse. Thousands for stores were closing, dozens of brands going bankrupt, and big stock sell-offs. It was the first phase of the predicted meltdown to be caused by the shift to ecommerce. However, this year retail stocks have soared, with the leading retail ETF (XRT) up 35% from its low last year. That said, there are still some great buys. The sector’s overall P/E is still just 16.4, well below its historical average of 18.8. Store closings have stabilized margins and consumer confidence and spending are rising, a strong proposition for the sector. Some good names to look at are Kohl’s, Gap, and Michael Kors.
FINSUM: Retailers are starting to figure out how to navigate the new ecommerce-driven paradigm, and the sector’s future is looking much brighter than it did 18 months ago.
Many investors are currently worried about the potential for a tech bubble. Between high valuations, data breaches, and a growing call for more regulation of the sector, it is easy to feel bearish. However, Barron’s is telling investors to not be too worried. The opinion is based on analysis of tech price movements and outperformance against a new Harvard study. Historically speaking, a bubble can be referred to as at least a 100 percentage point outperformance of a sector versus the market as a whole over a two-year period, followed by at least a 40% drop over the following two years. By that metric, the tech sector isn’t even close, as it has only outperformed the market by 36% over the last two years.
FINSUM: So this was a valuation-based study, but it could theoretically also be applied to individual stocks. When you do that, both Amazon and Netflix look vulnerable, as both have satisfied criteria for a bubble.
The whole retail world is centered on Amazon right now. Will ecommerce, led by Amazon, continue to disrupt traditional retailers? That is the nauseatingly frequent question being fretted over by investors. Well, here are a group of Amazon-proof strategies that investors can use to pick retail stocks. The core of the argument is that retailers need to focus on the areas that Amazon is not good at offering. In particular: “experience; customer service; partnerships with influencers; and personalization”. Private label brands are another area, as companies like Target have launched in-house brands that are exclusive to their stores.
FINSUM: We believe in three of the areas mentioned, but in-house brands and customer service are not good strategies to outcompete Amazon in our mind. In-house brands just aren’t compelling enough (especially nascent ones), and we feel Amazon has better customer service (at least online) than almost anyone.
The Financial Times has just put out what we think is a very interesting story about the battle going on between President Trump and Amazon. The president has been pushing hard for a regulatory crackdown on Amazon, some say because of Jeff Bezos’ ownership of the Washington Post. But the FT points out that the president needs to tread lightly, as Amazon is a well-liked company and he might not win a popularity campaign against it.
FINSUM: Amazon is apparently the 10th most reputable company in the country. Trump’s approval rating is 43%. Even if Trump is right to try to breakup up some of Amazon’s grip, it seems like a risky campaign.