Each December, as we approach the end of the year we take time to look back over the fading year and try to pick out the best stocks. These stocks are not always the ones with the biggest earnings, or the highest percent gain over the year… but instead companies that were able to reward their stockholders, satisfy their customers, and improve their overall business model.
For 2012, we believe the stock of the year is Amazon (AMZN).
Amazon’s CEO, Jeff Bezos, has been referred to as the next Steve Jobs, and taking a closer look at Bezos, and his decision making process makes the comparison easy to understand. He has a charismatic leadership about him, and he puts more of an emphasis on taking over the world as opposed to appeasing Wall Street with quarterly earnings figures. He understands that business is a long term adventure, and he seems to always make the right decision when it comes to building on Amazon’s already impressive footprint.
A few years back, Amazon was facing a similar problem as Barnes & Noble (BKS)… having a successful e-reader that was being left behind in an increasingly mobile world. Apple’s (AAPL) iPad, and the legion of Google (GOOG) Android tablets, were quickly taking over the world, and stamping out the need for people to carry around a Kindle of Nook e-reader.
Amazon decided to take the step to convert its e-reader into an Android tablet, as did Barnes and Noble, but the genius of Amazon was the decision to sell their Android Fire tablets at a loss. Critics were quick to point out how bad of a decision this was, but Bezos knew better. He knew that the real power of the Kindle was its ability to be a point of sale device, and he was right. And Amazon’s tablet market share took off immediately.
While companies like Microsoft (MSFT) and Hewlett Packard (HPQ) have been unable to compete against Apple and Google in the tablet market, Amazon has slowly but surely been expanding its market share. According to analysts at Pacific Crest, had previously estimated that the Kindle line would represent 11% of all tablet shipments during the year, but has recently increased that estimate up to 13%.
The world is going more mobile, and Amazon continues to be on top of the e-commerce game. Consumers are spending more time shopping online, and while brick and mortar stores have had a disappointing holiday season so far, e-commerce sites have not. This year, online sales on Black Firday topped $1 billion for the first time in history. Amazon ranked #1 among all e-commerce sites on Black Friday
When judging stocks, some analysts only look at quarterly earnings. While there is some merit to this, for growing companies like Amazon it is not the best way to judge its business. The company is looking to the future, and that means investing in the future. Bezos knows this, and that is one reason to look past earnings and focus a bit more on the company’s revenues.
During the third quarter, Amazon’s earnings were negative, but it had a 27% jump in revenues versus the same period last year.
Amazon continues to grow its tablet presence, and is beefing up its video offerings through Amazon Prime. It is expanding its movie and video offerings to over 30,000 as it continues to apply pressure to Netflix in the streaming video market.
Amazon had a great year in terms of product advancements, all signs are pointing to a strong future for the company. Investors have a lot to look forward to in the years ahead, and the 49.5% jump in share value this year was not too bad either.
Disclosure: The author of this article has a long position in Amazon.