There has been a lot of stuff written about Amazon this week because Monday was the 20th anniversary of its listing on Nasdaq, mostly focusing on the 63,990% increase in its share price over those 20 years.
There have been umpteen variations on the theme of $100 invested 20 years ago would now be worth $64,000, without mentioning of course the many other stocks in which $100 invested 20 years ago would now be worth nothing, or not much. But that’s investing isn’t it – it’s called “survivor bias”.
Here’s my favourite Amazon chart:
Quarterly revenue has gone from zero to $40-ish billion, but profit has stayed pretty much at zero.
In other words shareholders in this company have been massively rewarded even though it still doesn’t make any money 20 years after listing and definitely doesn’t pay any dividends.
And Goldman Sachs has Amazon as a strong buy with a target price of $1250, 30% higher than the current price of $957!
If you think there is no point buying a stock that costs close enough to $1000, because how much more can it go up, think again.
Berkshire Hathaway A shares were worth $957 each in March 1983, also 20 years after Buffett started. They now cost $245,800 each, also without paying a dividend. That’s a compound annual rate of return over the past 34 years of 16.4% per annum – not too shabby, as my broking mates would say.
Can Jeff Bezos do over the next 34 years what Warren Buffett did since 1983? I don’t know, but maybe. He is as smart as Buffett I think, and just as focused on growing capital; the difference is that Buffett is all about the people who work for him, and shareholders, while Bezos is all about customers.
In 1983, Buffett was 53, the same age as Bezos is now. Twenty years earlier he had taken over a textile manufacturing firm named Berkshire Hathaway and transformed it into his investment vehicle, and by 1983 was just getting warmed up. He is now aged 86 and still going.
Jeff Bezos is also 20 years into his journey. He is also 53 and you get the feeling that he has also just begun, and what’s more will probably live into his mid-80s, if not 90s the way medical science has progressed.