Last week, I added more to both my Facebook Inc (FB) position at $332.6915 and Amazon.com, Inc. (AMZN) position at $3290.5248. Facebook is still my 2nd largest holding and Amazon is my largest holding.
The recent downward pressure makes for a good opportunity to add more or initiate a positions in both of these.
Reason for Opportunity in Facebook
For Facebook, because of my daily use of their ads product for both my own and client businesses, I see first hand that we continue to increase spending on ads and continue to get great results from ad spending. Over time, the results are equal and sometimes better than we get with Google or Bing ads. This trend makes me feel very confident in their future despite the headwinds of strong competitors and regulations.
In fact, I believe more regulation of the industry will benefit Facebook as they are already much further ahead on this than their competitors – it will be more an issue for them than Facebook which is no wonder that Mark Zuckerberg himself supports regulation.
The price is very cheap here well under a 1 PEG and I believe most possible negatives are more than priced in which makes for a great opportunity.
Reason for Opportunity in Amazon
For Amazon, again, we utilize their platform for our own retail operations and continue to see good sales conversions. We use the ads to boost our products in Amazon search results and it works really well. I see continued preference by people I know to buy from Amazon. I’m particularly intrigued by their push to make it easier for us sellers to use their fulfillment services for our own sales made on our own websites. Their pricing is very competitive and would free up our time/resources to focus on the business itself. We are strongly considering having Amazon take over all our fulfillment.
We’ve also been very pleased with their AWS services.
Amazon also faces increased regulatory pressure as well as needs for more investment in logistics/delivery. Both of these I believe are beneficial for Amazon. They are more than capable of dealing with more regulation and any new regulation is more likely to be more of an issue for competitors. Increased investment in logistics/delivery will make them stronger going forward.
The price is attractive here and even though it’s our largest position already, are confident in adding more at lower prices.
For both Amazon and Facebook, my biggest concern is supply chain issues causing lack of supply of products for the holiday season which could reduce sales and ad spending, but of course this would be temporary and not affect the long term viability of both businesses.
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