Displaying items by tag: Amazon
Goldman Sachs has a new platform for investors to assist in portfolio management. In a partnership with Amazon’s cloud division, GS is bringing data and software tools for software management to a cloud computing environment. The product will give investors access to aggregated data and GS expertise in investing. Additionally they hope to lower the barrier to entry for quantitative trading techniques and allow smaller firms to have access. The partnership came as a shock at how close both companies are to one another. This also adds another company to Amazon's growing list of cloud based partnerships which have had an incredibly high success rate. GS will monetize the platform and target it to hedge funds and other financial companies.
FINSUM: This products biggest benefit will be the clean data and accessibility, but a strong partnership like this could send regulation warning signs to Washington.
The CME Group has published a piece about the outlook for FAAMG stocks in the context of the underlying economy. The CME notes that the FAAMG stocks now account for 22% of the total S&P 500, so their influence is skewing investors’ view of the underlying economy. The reality is that the S&P 500 minus those five stocks is a much more accurate—and much bleaker—representation of the economy. CME says that as the reality of a slow recovery starts to play out in the market’s consciousness, there is bound to be a correction in FAAMG stocks.
FINSUM: The law of gravity would seem to dictate that a fall in FAAMG is inevitable, but what is the catalyst for such a move? Their earnings are good as is growth momentum.
No matter how good you may feel about stock indexes being back near all-time highs, one fact cannot be ignored: the market seems to be heavily overweight on the five largest tech stocks— Microsoft, Facebook, Google, Apple, and Amazon (the new acronym, named by Goldman is FAAMG). These stocks have been powering the market, but the whole situation feels like past peaks where their outperformance could not go on forever. Concentration in the S&P 500 is now at its highest in decades, with those five names accounting for 22% of the total capitalization, up from just 16% a year ago. According to Barron’s “Simple arithmetic limits the continued outperformance of the biggest names, the Goldman team observes, because many portfolio managers have 5% limits on holdings of any given stock. The strategists’ analysis shows that the average large-cap mutual fund already has a 5% position in Microsoft and about 4% positions in the other big four names.”.
FINSUM: It seems these stocks are reaching their institutional allocation limits, which mans retail needs to power them higher. The whole situation feels ripe for a correction.
If Biden wins the presidency and Democrats take the House and Senate, tax hikes look inevitable. Biden is already publicly planning for them, and the way the polls are going, advisors would be wise to give the eventuality some thought. Even if Democrats don’t win the Senate, there may still be a tax overhaul. With that in mind, these are the stocks likely to be the hardest hit by a Democrat-led tax package. Based on Biden’s plan, it looks like a 10% rise in overall corporate taxes. Zion Research is leading the charge into the analysis, and here is an overview (quote from Barron’s): “Zion notes that 117 companies [in the] S&P 500 have over $100 million in net income that had cash tax rates less than 15%. Biden’s plan for a 15% minimum tax on book income would mean that group combined pays another $37 billion in taxes. According to Zion, nearly half of that would come from five companies: Berkshire Hathaway (ticker: BRK.B), Intel (INTC), AT&T (T), Duke Energy (DUK) and Amazon.com (AMZN). Biden called out Amazon specifically during his speech, when he said, ‘The days of Amazon paying nothing in federal income tax will be over’”.
FINSUM: This is quite astute analysis as these are stocks that are benefiting in a very significant way from the current tax regime. Amazon seems to have a big risk here that is not properly understood by the market.
One of the things that makes Amazon such an extraordinary company is that it is always on the look out for the next great business opportunity, and always seems to be one step ahead in executing it. AWS anyone? Now the champion of Seattle may be eyeing a new target—ride-sharing. Amazon is considering the acquisition of Zoox, a well-known autonomous vehicle company. If it were to acquire Zoox, it would immediately be in competition with Uber and Lyft in the soon-to-be autonomous ride-sharing market.
FINSUM: We assume Amazon also has some yet-to-be-understood purpose for this beyond just competing with Uber and Lyft. For instance, autonomous delivery/logistics vehicles?