Displaying items by tag: Amazon

(New York)

Markets have been falling in aggregate, but the real damage has been to the tech sector (and utilities to a lesser extent). Facebook, for instance, fell a whopping 6.8% yesterday on fears of fallout over its data breach. But Amazon, Netflix, and Google, all tumbled as well. Tech stocks have been such a leader for markets, and now amount to such a major percentage of indexes ($2.2 tn), that some are worried tech losses could rattle the whole market. Mounting fears over regulations seem to be weighing on the sector.

FINSUM: The odd thing is that it is not fears over tech businesses that are causing losses, but rather fears of regulation. We do absolutely believe big losses in tech could shake the confidence of the market as a whole.

(New York)

Walmart stockholders beware, the company might be in for a big scandal. A whistleblower internal to the company has come out claiming that Walmart is using misleading ecommerce results to make investors believe it is catching up to Amazon. A former director of business development says he was fired after raising concerns at the company about its “overly aggressive push to show meteoric growth in its e-commerce business by any means possible -- even, illegitimate ones.” “Wal-Mart sacrificed and betrayed its founder’s key principles of integrity and honesty, pushing those core values aside in its rush to win the e-commerce war at all costs”, said the whistleblower.

FINSUM: So reading these claims, we do not see any evidence of the claimant saying Walmart actually falsified financial results, only that it used aggressive tactics (such as underpaying vendors), so the damage may not be that bad.

(New York)

Advisors look out. The big bang moment in wealth management might be about to happen. That moment might be when Amazon launches its own robo advisor, taking the concept to the masses in a way that has not been done before. Amazon is already getting involved in finance with its pursuit of checking accounts and ecommerce retailer Overstock.com is launching its own robo. One wealth management commentator put it this way, saying “Advisers have their head in the sand; they are in denial … Many think this won’t affect them or their clients … There were probably a large number of buggy manufacturers that were saying the same thing in 1910”. Amazon has a mountain of using data on people’s spending habits, which could give them a leg up.

FINSUM: It seems like only a matter of time before Amazon moves in this direction. There is still good margin to be had in this space, which makes it ripe for Amazon.

(New York)

There is a lot of hype about disruption in the shipping business right now. Many investors fear that Amazon will start a major delivery network, and/or come to deal with a smaller company that undercuts the profits margins of UPS and FedEx. But make no mistake, that is going to be very difficult to do because of the nature of the delivery business itself. Residential deliveries, especially the “last mile”, are very capital intensive and require major installed bases of infrastructure for fulfillment. This means any loss-leading pricing will likely prove short-lived.

FINSUM: The big old players have a strong grip on the market. Only Amazon has the clout and capital to unseat them, but it would take several years of major capital commitment to do so, and it doesn’t seem to make enough sense to undertake that.

(New York)

This topic gets thrown around a reasonable amount in the media, but because it seems to defy normal human perception, we wanted to run a story on it—the growing and dangerous level of stock concentration. So what do we mean by that? We mean that three stocks—Amazon, Microsoft, and Netflix, have accounted for almost 50% of all the gains of the S&P 500 so far this year. This kind of concentration plays itself out time and again, whether it be in broad index tracking, or in niche sector ETFs, which end up being hugely weighted to just a few stocks.

FINSUM: Anyone can understand the danger of concentration at the point of purchase, but one of the key points to remember is that time tends to make a portfolio more and more unbalanced as the winners inevitably grab a larger share and the losers less.