Amazon's equity value

[HognotinMemphis]

Twenty years since Amazon (NASDAQ:AMZN) made its public debut on the Nasdaq and in that time shares have gone from $1.50 on a split-adjusted basis to $960. What started as an online book seller has evolved into a retailing giant and dominant provider of cloud technology. Amazon currently has a market cap of $465B, with annual revenues of $136B.

If you put $20,000 into Amazon at its IPO and held through today, that position would be valued at approximately $12 million. But who does that? I would have sold it all off long ago and diversified into other investments, and/or bought a home, or given some away.

[Vantage 8 dude]

Twenty years since Amazon (NASDAQ:AMZN) made its public debut on the Nasdaq and in that time shares have gone from $1.50 on a split-adjusted basis to $960. What started as an online book seller has evolved into a retailing giant and dominant provider of cloud technology. Amazon currently has a market cap of $465B, with annual revenues of $136B.

If you put $20,000 into Amazon at its IPO and held through today, that position would be valued at approximately $12 million. But who does that? I would have sold it all off long ago and diversified into other investments, and/or bought a home, or given some away.

True; however, here would be a very nice alternative in that situation. Sell enough of the original investment to recoup your original cost basis. While you'd obviously be paying some long term capital gains tax, and at a low rate, you would recover all your original investment in the holding. The remaining position essentially represents pure profits or another way of looking at is that it's the "market's money" you're now holding. All of that going forward represents pure profits-a true "win-win" for the investor.

[HognotinMemphis]

True; however, here would be a very nice alternative in that situation. Sell enough of the original investment to recoup your original cost basis. While you'd obviously be paying some long term capital gains tax, and at a low rate, you would recover all your original investment in the holding. The remaining position essentially represents pure profits or another way of looking at is that it's the "market's money" you're now holding. All of that going forward represents pure profits-a true "win-win" for the investor.

That goes without saying. But unless you work for Amazon, no one is going to sit on a low to no cost basis now worth $12 million. It would have all been sold off over the past 20 years because no one would ever think it would rise this much. They would be scared to death that their $3 million or $4 million would go back to half or less of that. They would never hold it for the entire past 20 years.

[Vantage 8 dude]

That goes without saying. But unless you work for Amazon, no one is going to sit on a low to no cost basis now worth $12 million. It would have all been sold off over the past 20 years because no one would ever think it would rise this much. They would be scared to death that their $3 million or $4 million would go back to half or less of that. They would never hold it for the entire past 20 years.

Well perhaps not. While I obviously can't say I have been thus far so fortunate with AMZN, I do have a ton of shares of Apple that I purchased a few years back with an adjusted cost basis of around $4.00 a share; also hold a wad of Microsoft with an adjusted costs basis of just over $2.00 a share.

Certainly the latter went through a time when a ton of folks seriously doubted whether or not they'd ever recapture their "mojo" once Windows went from the penthouse to the outhouse as Apple and others began eating their lunch when it came to operating system. However, as we know a funny thing happened on the way to their supposed demise-they finally got the idea of helping develop and promote the Cloud, and we all know what's happened there.

My point is that while no one can be guaranteed a sure winner in the market, if they have enough patience, faith and guts to stay with a company through ups and downs an investor can make very good money. A huge key is trying to predict/envision what the company's business model will look like down the road AND how well their management is willing and able to adapt to the inevitable competition and changes in their industry. It truly is both the survival of the fittest and the survival of the great adaptors.

One other thing: I try to practice what I preach. I have sold small positions in both stocks in order to recover my original cost basis. I've used those funds to purchases shares of two other tech companies-one named Google and the other is Facebook. Still holding those positions and will likely continue doing so for a while longer.
 

[hog.goblin]

Well they just used it to buy Whole Foods.  My understanding is that they will leave Whole Foods intact, but some leverage them to increase their food delivery business.

I suspect before long you'll see an Amazon presence in the coffee shops of Whole Foods as well.

[Vantage 8 dude]

Well they just used it to buy Whole Foods.  My understanding is that they will leave Whole Foods intact, but some leverage them to increase their food delivery business.

I suspect before long you'll see an Amazon presence in the coffee shops of Whole Foods as well.

It will be interesting to see if there actually emerges and second (or more) bidder for WFM. Speculation that someone else might want to "sweeten the pot" and try to wrestle Whole Foods away from the Amazon proposal. Kinda like being the only gal with at least five other guys stranded on a deserted island in the middle of the ocean.