B.I.G. Tips – Death by Amazon – 2/25/22

In this note we update performance of our “Death By Amazon” and “Amazon Survivors” indices. The rebound from the COVID shock led to massive outperformance of retail-related stocks like those in our “Death By Amazon” index which made up its entire performance lag versus the broad market since 2012. Since November, that outperformance has trailed off dramatically as “meme” stocks that happen to be in the portfolio trail off and the broad market declines. Since inception, total returns for the DBA are roughly in-line with the overall market.

As for “Amazon Survivors,” since 2016 there’s been significant outperformance that is entirely driven by their performance in the recovery from the COVID drop. Over the past five and a half years, this group of stocks have substantially outperformed the market as a whole. More recently, though, the index has lagged, underperforming the broad market in a manner similar to the “Death By Amazon” index.

Our “Death By Amazon” index was created many years ago to provide investors with a list of retailers we view as vulnerable to competition from e-commerce.  In 2016, we also created our “Amazon Survivors” index which is made up of companies that look more capable of dealing with the threat from online shopping.  To see how the two indices have been performing lately and view the full list of stocks that make up the indices, please read our newest report on the subject available to Bespoke Premium and Bespoke Institutional members.

To unlock our “Death By Amazon” and “Amazon Survivors” indices, login or start a two-week free trial to either Bespoke Premium or Bespoke Institutional.

B.I.G. Tips – Death by Amazon – 10/13/20

Amazon is now up over 1700% since inception of our Death By Amazon indices, while our equally-weighted Death By Amazon index has lagged the S&P 1500 by 70 percentage points over that period. Amazon hasn’t managed to push back above its July 9th relative performance when it rose to 5.83% of the S&P 500’s market cap. Earnings are due in 10 days, with analysts expecting EPS to rise over 70% versus a year ago on revenues 31.7% higher. Contrary to popular perception, Amazon is very profitable. For Q3, analysts forecast a 14.6% EBITDA margin versus 13.8% a year ago, meaning the company earns 17 cents of EBITDA for each dollar of new revenue. Of course, much of that comes from cloud, where competitive pressures are intensifying, but cash flow is cash flow at the end of the day. As for competitors, the fact that we’ve removed another name from our index this month (SMRT due to bankruptcy) is just more evidence of the force of Amazon at work.

Our “Death By Amazon” index was created many years ago to provide investors with a list of retailers we view as vulnerable to competition from e-commerce.  In 2016, we also created our “Amazon Survivors” index which is made up of companies that look more capable of dealing with the threat from online shopping.  To see how the two indices have been performing lately and view the full list of stocks that make up the indices, please read our newest report on the subject available to Bespoke Premium and Bespoke Institutional members.

To unlock our “Death By Amazon” and “Amazon Survivors” indices, login or start a two-week free trial to either Bespoke Premium or Bespoke Institutional.

B.I.G. Tips – Death by Amazon – 8/20/20

Amazon (AMZN) is up to 5.7% of the S&P 500’s market cap. While other large tech-adjacent names have had a similarly large impact on the aggregate market this year, the e-commerce giant remains somewhat unique for its scale and penetration into every possible market. At the same time, it’s interesting to note that many other retailers have been able to thrive in this environment. Target (TGT), Wal-Mart (WMT), Home Depot (HD), and Lowe’s (LOW) are all examples of retailers that have leveraged a combination of unique offerings and extremely rapid digital sales growth. 100% YoY sales growth for digital channels is the norm for many major retailers at this point. Unfortunately, while some companies have been able to thrive in the current environment, smaller and more specialized retailers haven’t been able to drive traffic as well. Two recent de-listings removed from our index this month (ASNAQ and TLRDQ) are examples of stocks that haven’t been able to keep up.

Our “Death By Amazon” index was created many years ago to provide investors with a list of retailers we view as vulnerable to competition from e-commerce.  In 2016, we also created our “Amazon Survivors” index which is made up of companies that look more capable of dealing with the threat from online shopping.  To see how the two indices have been performing lately and view the full list of stocks that make up the indices, please read our newest report on the subject available to Bespoke Premium and Bespoke Institutional members.

To unlock our “Death By Amazon” and “Amazon Survivors” indices, login or start a two-week free trial to either Bespoke Premium or Bespoke Institutional.

B.I.G. Tips – Death by Amazon – 7/9/20

So far this year, Amazon has added $620bn to its market cap versus $1.12 trillion in market cap declines for the rest of the current S&P 500 membership that was trading at the end of 2019.  357 companies have seen declines in market cap YTD, totaling $3.3trn. In short, equity market cap is consolidating dramatically into the top of the index. A similar process has been underway in economic data. For Q1, the Census reported e-commerce sales topped 11% of total retail sales for the first time, a 0.5% increase versus Q4 of 2019. That increase in share was the largest ever and is indicative of how much market share is being gobbled up by Amazon and a few other e-commerce giants. From an equity market return perspective, huge gains for Amazon are totally consistent with the big underperformance of our Death By Amazon Index over the past few months. Distress leading to de-listings has also mounted, as measured by four different names coming out of our Death By Amazon Index this month.

Our “Death By Amazon” index was created many years ago to provide investors with a list of retailers we view as vulnerable to competition from e-commerce.  In 2016, we also created our “Amazon Survivors” index which is made up of companies that look more capable of dealing with the threat from online shopping.  To see how the two indices have been performing lately and view the full list of stocks that make up the indices, please read our newest report on the subject available to Bespoke Premium and Bespoke Institutional members.

To unlock our “Death By Amazon” and “Amazon Survivors” indices, login or start a two-week free trial to either Bespoke Premium or Bespoke Institutional.