Healthcare investors are getting very nervous about the industry getting “Amazoned”. Ever since Amazon received several licenses to sell and distribute pharmaceuticals several weeks ago, paranoia has gripped the sector. It is looking increasingly likely that Amazon will start to sell prescription drugs, and in doing so, grab market share and drive down prices. The pharmaceutical business is worth $450 bn per year in the US. The sector is responding with potential mergers and the quick adoption of next day prescription delivery, all presumably efforts to pre-empt an Amazon takeover.
FINSUM: This sector looks absolutely ripe for Amazon, and we expect the company will apply its excellent customer service and major logistics prowess to grab market share here.
Bitcoin is being called one of the grandest bubbles in history, perhaps akin to the famed tulip bubble. But a new survey shows that opinions on bitcoin are highly bifurcated along generational lines. Despite viewing stocks as too risky, Millennials generally are much more optimistic about bitcoin than Baby Boomers. One of the big drivers of this higher level of faith in the cryptocurrency stems from an expressed belief that bitcoin is more “trustworthy” than big banks, a strong point of difference between Millennials and those 65 and over.
FINSUM: Bitcoin is just a very new type of asset class without any of the traditional safeguards. It is also fundamentally digital. Taken together it makes perfect sense that younger people would be more comfortable with it.
If there was ever a contrary opinion to the prevailing narrative, this is it. Bloomberg has published an article contending that Amazon has not yet figured out the grocery market, and that its purchase of Whole Foods was a sign of weakness, not strength. The company has spent a decade trying to break into groceries, but has been largely unsuccessful. The reality is that people don’t like to shop for groceries online, so the purchase of Whole Foods was more a recognition that the company could not apply its usual ecommerce model to this market than a signal it was set to “Amazon” it. Only 3% of grocery shopping happens online, and Amazon’s CFO recently admitted that there is “no one solution” for selling food.
FINSUM: This article frames the situation such that Amazon is searching for a way to delivery a great grocery service just like everyone else. It seems to be true. Maybe the grocery business does not have as much to worry about as investors think?
Artificial intelligence is arriving at a rapid pace all the whole economy. Different industries are adopting it in unique ways, all contributing to a culture of hysteria amongst the public over how it will affect labor markets. Well, Barron’s has published an article explaining who will be the winners and losers in AI. The big losers are some of the top names in tech, as AI will hurt tech support and outsourcing specialists, and include IBM, Google, Amazon, and Nvidia. The biggest winners will be the firms pioneering the technology, such as Facebook, Netflix, Microsoft, and oddly, Amazon, via its Alexa system.
FINSUM: We think this article is too broad to be very useful, but we do believe it is a good starting point for thinking about this. A lot of the benefits of AI won’t be sector changing, but will be margin positive, such as eliminating expensive back office positions in a number of different industries.
The calls for anti-trust regulation against some of Silicon Valley’s biggest companies are growing louder. A number of major events, like Facebook’s Russian fake news, seem to have turned the tide on views of Silicon Valley’s giants. Some academics are arguing that Google and Facebook are so fundamental to everyday life that they should be regulated like utilities. One other big consideration is Amazon, which has to this point escaped most anti-trust talk, but is experiencing more pushback. According to Scott Cleland, a technology policy official in George HW Bush’s White House, Amazon is facing a higher and higher likelihood of anti-trust regulation, saying “Amazon has big antitrust problems in its future … If there is a minimally interested, fair-minded antitrust effort in the Trump administration, Amazon’s got trouble“.
FINSUM: Given how dominant these companies are, it does seem like there may need to be some higher degree of regulation. On Amazon, we so far think their businesses have been good for consumers, but the amount of different business lines they are pushing into is bound to raise some eye brows.
Owners of stocks like Walgreens need to be very careful, as the pharmacy industry looks like it is about to get “Amazoned”. Amazon recently received several licenses to sell pharmaceuticals, a development which sent a shudder down the spines of healthcare investors. Evidently, Amazon’s model is to initially offer a B2B distribution service for pharmaceuticals, and then eventually expand that into a consumer-facing business. Amazon’s full entrance into the business could be 2-3 years away, but the market is apparently too big for the company to ignore.
FINSUM: This business seems absolutely ripe for an Amazon move, so we feel it is only a matter of time until the company launches a large-scale operation in the sector.