Amazon shares are priced well for long-term investors

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The Motley Fool’s Take

Amazon recently posted its first quarterly loss since 2015, and its stock recently fell 43% from its July peak. Is the company in great difficulty? Should investors stay away? No way.

Amazon’s loss came in a tumultuous time. Russia’s war against Ukraine has driven up fuel prices. Management noted that the cost of shipping containers overseas has more than doubled from pre-pandemic levels, and inflationary pressures have collectively added $2 billion in expenses compared to last year. . Amazon’s net loss also reflects $8.2 billion in unrealized losses on its equity investment portfolio. Without these factors, Amazon would have made billions in profit.

The company still enjoys a rock-solid competitive position in the e-commerce industry. Its market accounted for 41% of U.S. online retail sales last year, far more than the next 14 retailers combined. The company has an extensive fulfillment and logistics network, which gives them great control over shipping costs and delivery times. It also dominates the cloud computing industry and is gaining ground in a third high-growth market: digital advertising.

Amazon shares, which recently traded at 2.3 times sales – their lowest valuation in six years – look attractively priced for long-term investors. (John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool.)

ask the fool

From JA to Clinton, NY: What is the time value of money?

The madman responds: It is a business concept that assumes that a dollar today is worth more than a dollar in the future. This is partly because inflation erodes purchasing power over time, and partly because investing in the dollar today can make it more valuable in the future. (Test the concept for yourself: would you rather receive a dollar today or a dollar in five years?)

Stock analysts and business school students incorporate the time value of money when performing complex discounted cash flow analyzes to arrive at an estimate of the intrinsic value of a company or stock. (There are also simpler ways to estimate a company’s value, using metrics like price-to-earnings or price-to-sales ratios.)

A DCF analysis presents estimates of how much cash a company will produce over time, with future earnings discounted at a “discount rate” that is essentially the rate of return investors expect.

From CL to Phoenix: I’m thinking of moving when I retire. Where can I check the cost of living in different cities?

The madman responds: Try clicking Numbeo.com/cost-of-living — it provides the cost of living in many cities and countries. It offers detailed breakdowns by category and you can compare locations. For example, it recently showed Atlanta rental prices and grocery prices 12.6% and 7.8% lower, respectively, than Denver.

A little research online can bring up more cost of living calculators, some of which include health care data, which is important for many people, especially those who are retired or close to retirement. . MyMove.com/cost-of-living provides specific examples of health care costs for cities in the United States.

How to Guess the 2023 Social Security Cost of Living Increase

school of fools

Superinvestor Warren Buffett has recommended simple, low-cost index funds, such as those that track the S&P 500, for most investors. The beauty of these funds is that you can keep adding money to them over time no matter what the market does, and they’ll provide roughly the same return as the index (minus fees). However, many investors prefer to invest some or most of their money in individual stocks. It takes more work, and it’s not always easy, especially at times like this.

The stock market has fallen sharply in recent months, with the S&P 500 recently falling more than 18% year-to-date. A number of previously high-flying stocks (those that attract a lot of investors) have fallen by 50% – and some by much more. This can easily rattle investors, and the market drop shows that many of them are selling frantically.

Some of these investors may be selling because they no longer have confidence in their investments, and that’s fine. Others, however, panic sell simply because their peers are selling. This is usually the wrong thing to do during a market selloff, as this is when large stocks are often on sale.

Buffett also advised investors that if they “insisted on trying to time their participation in (stocks), they should try to be fearful when others are greedy and greedy only when others are fearful.” In other words, if everyone is buying and the market is rising, be careful because many stocks will be overvalued. And when the market drops sharply, it’s the perfect time to shop. Buffett’s advice is essentially another way of saying “buy low, sell high” – the primary way to make money with stocks.

Severe volatility in the market, such as we have experienced recently, however, can be stressful and even frightening. You could reduce your stress by reading more about investing and understanding that the market will always be volatile. Also remember that every crash was followed by a recovery.

My dumbest investment

From AN, online: Around the time of the oil crash in 2016, I invested in several oil company stocks near their lows and enjoyed incredible initial returns. I was kind of in love with them, so I hung on. (I wasn’t well-diversified either.)

I weathered my mother’s death, a bad breakup, and an international posting in Asia, all without paying too much attention to actions. Neglecting my portfolio turned my big returns on timely investments into big losses.

When I couldn’t track my stocks, I should have put everything into cheap index funds until I could actively manage my portfolio again. I’m not saying you should monitor the markets every day and trade frequently, but you should know enough about your investments to be able to modify your strategy if necessary. If something happens where you need to be idle for a while, it’s best to diversify well into safe companies or switch to index funds. Obviously, not diversifying was my other big mistake.

The madman responds: We can’t add much to the issues you noted and the solutions you suggested. Low-fee index funds such as the SPDR S&P 500 ETF will serve most of us just fine, requiring little attention.

Note that there are no “safe” companies, but healthy and growing established companies with strong track records require less attention than other companies.

Who am I?

My roots date back to 1946, when I was founded as an informal hotel referral system. (My average rate at the time was about $5.40 per night.) In 1962, my reservation system was the only one nationwide. A year later, my 699 member hotels have made me the largest hotel chain in America. I entered Mexico in 1976. Today, based in Phoenix, I have approximately 4,700 hotels in over 100 countries and territories. My 18 brands cover economy, upscale and luxury varieties and include Sadie, Aiden, WorldHotels, SureStay and a chain with my original name. Who am I?

Don’t remember last week’s question? Find it here.

Answer to last week’s quiz: The reception deposit

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