ON OCCASION, FOLLOWING IS THE SMART MOVE. REALLY.
What crowd? Right. Obvious lines leading straight to the good stuff don’t form in the market. Or do they?
Following is as old as fire and just as tricky. Crossing the Moors? Following’s good. New medications? Following. Following cool? Tough call. Buying Amazon, Facebook, or Alphabet, is following. Following’s good here also?
Prime Day 2017 will be massive. Just wait for the jaw-dropping #s. How many people need to eat the Amazon pill before the holdouts do? The doctor informed us to “Down our medicine quickly, when it drops below $950.00.”
Do individual investors fully grasp the trajectory of Amazon, Facebook, and Google? Yes. We believe individual investors believe all three will likely dominate. Yet many feel they are too expensive to buy.
Observable lines do form in the market. The market darlings of Cramer’s FANG are all visible lines behind great winners. Here’s another obvious bullish line. The call volume. Call option volume is direct bullish investor line forming.
When Amazon’s affordable in traditional P/E metrics it won’t matter any more as an investment. It’s called maturity. Think GE, GM, IBM.
Our $950.00 level is also Morningstar’s newest “Fair Price” for AMZN. Nice to know and what’s it mean? Year to date Amazon’s gone from $747.70 six months ago, to the high of $1017.00.
Is the 33% move YTD a step too far? Not for those able and willing to hold the stock. As of writing 7-11-17, 6:04 am, shares stand at $996.47. Morningstar also pegs a 4/5 Star rating with a ” Wide Economic Moat.”
Economic moat measures the “strength and sustainability of an enterprise’s competitive advantage.” If anything Amazon is widening the moat–think logistics; planes, trucks, drones, people, all Amazon. The shippers are watching extremely closely. Fed-Ex, UPS, and USPS, are running margin models.
Amazon sports a huge moat, and have you seen the gorgeous new Prime planes? That’s real branding. Nice. Very nice.
As Amazon dances over the planet with massive institutional support, some investors sit on hands. By the numbers and for all the hand wringing: AMZN trailing P/E 186, forward P/E 149, Price-to-Earnings Growth(PEG) 8.16. A PEG ration of 2 is traditionally viewed as “expensive.”
Blinking forth a specter-high price to earnings growth rate of 8.1 who would touch Amazon?
What are analyst’s saying right now? Credit Suisse puts AMZN on the buy list. Value hawks Ned Davis says hold. Reuters Research is a 4/5. Charles Schwab says a C rating.
The charts, or technical outlook, for Amazon suggests slowing momentum, support at $955.03, and a possible trend reversal. Market Edge says trend reversal confirmed if stock drops below $926.50.
Institutional money circles through the market darlings piggy-bank style.
Sick of hearing about AMZN, FB, and GOOGL? If you own them, you shouldn’t feel sick or tired. If you don’t own them should–feel sick until you do.
The Wall Street drama party churns on, mostly led by valuation concern. Yet behind the churn remain the clear market darlings. Investors complain about market opacity. Amazon rolls upward by 33% while many then complain “valuation.” No market’s perfect. but some stock and company combos are.
Amazon will eventually fall and perhaps look like Apple, or even a value play. Weird. But one of the two will be true. Follow the crowd now. It’s called “the easy money.” Amazon will continue leading retail, and market growth.
As long term investors we view as a gift Amazon’s cldarity. Amazon’s penetration into businesses it now conducts is shallow. AMZN’s “total addressable market” or TAM” is world-wide by their own designation. It’s early days for Amazon. Let it come down to $950.00 on no news. Then buy half.
When: $950.00, or on 3% pull back. On no bad company news. This may not happen any time soon.
How: Scales. Half to begin. Limit order.
Where: Best case–buy inside an IRA–Individual Retirement Account.
Following the smart money now and growing Your personal path along the way.
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Images sourced from Pixabay.