Why Don’t We Own Amazon?

The performance of Amazon’s stock has been remarkable. This year alone its stock price is already up 24% and it has generated an average annual return of more than 37.5% since it went public 21 years ago.  A $10,000 investment in 1997 is now worth $7.4 million![1]

Jeff Bezos, the CEO of Amazon, once said, “Your margin is my opportunity.”  From its humble beginnings as a book seller it has grown to dominate more than a few categories.  It has decimated the retail sector and it’s looking to conquer the healthcare and freight delivery industries.  When these initiatives were announced it sent several stocks tumbling, stocks such as Walgreens, United Healthcare, and FedEx.

It’s hard to beat Amazon as a stock and a company.  Amazon Prime is a phenomenal service.  I recently went to my local Home Depot to buy a cabinet hinge but couldn’t find what I was looking for, so I logged into my Amazon account, ordered the hinge, and had it delivered to my home the following day.

At a recent account review meeting I was asked by a client why he didn’t own any shares of Amazon.  I told him he owned it indirectly through his mutual funds.  I showed him where four of his funds owned a sizable position in Amazon and this meant his allocation amounted to about 1% of his stock holdings.

Furthermore, I pointed out to him how he also owned Alphabet, Apple, Facebook, Netflix and the other highfliers he repeatedly hears about on CNBC.

We continued our meeting and I asked him if he had ever heard of Douzone Bizon.  He had not.  I said it’s a South Korean company and this year the stock is up 64%.  I told him he owns it through his emerging markets fund.   I then asked him if he knew anything about Ablynx.  He hadn’t heard of this company either.  I mentioned to him that it’s a Belgium company he owned in his international small-cap fund and the stock is up 112% year-to-date.   I mentioned one last company he hadn’t heard of, KapStone Paper and Packaging.  This is a company he owns in his US small cap fund and it’s up 52% so far.

As the meeting progressed, we discussed how he owns several thousand companies from around the world giving him exposure to companies he might not buy on his own.  Individual investors who trade stocks tend to focus on buying shares of companies they know and trust. This isn’t a bad strategy, but it often ignores companies from around the world.  The United States stock market accounts for about 52% of the global stock market capitalization meaning the remaining 48% is outside of our borders.  If an investor only focuses on our market, he may miss out on opportunities found in other countries.

After our meeting my client felt better because he owned shares in Amazon through his funds.  He no longer felt as if he was missing out on one of the great stock market success stories of our time.

If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table.” ~ Jeff Bezos.


Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.


Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog and investments aren’t guaranteed.  Photo Credit: Tom Cross.







[1] Morningstar Office Hypothetical Tool.  AMZN stock price from 5/15/1997 to 1/31/2018.

Alexa, Conquer the World!

Amazon is taking over the world one acquisition at a time.   On Friday Amazon announced its buying Whole Foods.  Whole Foods will join Audible, The Washington Post and Zappos as Amazon subsidiaries.  As an Austinite I can hardly wait to order miniature empanadas from my Prime account and have them delivered by a drone.

Amazon isn’t the first company to pursue world domination.   Sears Roebuck was one of the first companies to dominate the corporate landscape.  At one point, Sears was the largest retailer in the world while owning the tallest building in the world.  Sears owned Craftsman, Kenmore, Dean Witter, Discover Card, Coldwell Banker and Allstate Insurance.   The Sears Catalog was the early version of the internet.  A shopper could purchase almost anything from the catalog including a home.  Sears was the bluest of the blue chips and a fixed member of the Dow Jones Industrial Average.    Sears Holdings is a skeleton of its former self and they’ve sold most of their iconic holdings including the Sears Tower.   A $10,000 investment in Sears Holding in April of 2003 is now worth $7,680 delivering an average annual loss of 1.85% per year for the shareholder.[1]

Berkshire Hathaway is the opposite of Sears Roebuck.  Berkshire Hathaway, led by Warren Buffett and Charlie Munger, is a financial behemoth owning notable companies like Geico, See’s Candy, Benjamin Moore & Co., Fruit of the Loom, Justin Brands and Kraft Heinz.  A $10,000 investment in Berkshire in May of 1990 is now worth $346,500.[2]   A $1,000 investment in Berkshire Hathaway in 1964 is worth $13 million today![3]

I’m rooting for Mr. Bezos to succeed.  So far, so good.  A $10,000 investment in Amazon in May of 2007 is now worth $5 million.

How can you find the next Mr. Buffett or Mr. Bezos?  An investor trying to find one or two companies to last a life time is difficult.  A better alternative for most individuals is to own a portfolio of low cost mutual funds.

The Dimensional Funds listed below consist of large, small, international, and real estate companies.  It also contains a bond fund.  The funds in the portfolio had a wide range of returns.   The DFA US Small Cap portfolio returned 42.21% in 2013 while the Emerging Market Fund lost 14.85% in 2015.   Despite the wide range of returns in the individual funds the portfolio averaged 9.79% over the past five years.  The combined portfolio generated a 19.5% return in 2013 and lost 0.80% in 2015.[4]

  • DFA US Core Equity I (DFEOX)
  • DFA International Core (DFIEX)
  • DFA US Small Cap (DFSTX)
  • DFA Real Estate (DFREX)
  • DFA Emerging Market (DFCEX)
  • DFA Investment Grade (DFAPX)

It’d be nice to find an early stage Amazon or Berkshire that grows into a multi-national corporation generating market crushing returns for generations, however, this may not be possible.   I’d recommend allocating 5% to 10% of your portfolio if you’re going to try and find the diamond in the rough.   The remaining 90% to 95% of your account should be invested in a diversified basket of low cost mutual funds to be held for the long haul.

Happy shopping!

Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up.  ~ Galatians 6:9

Bill Parrott is the President and CEO of Parrott Wealth Management.   For more information on financial planning and investment management, please visit www.parrottwealth.com.

Note:  Past performance is not a guarantee of future performance.  Your returns may differ from those listed in this blog.

June 18, 2017


[1] Morningstar Hypothetical Tool.

[2] Ibid.

[3] http://www.businessinsider.com/warren-buffett-berkshire-hathaway-historical-returns-2017-5, Andy Kiersz, May 5, 2017.

[4] Dimensional Fund Advisors Returns Web.