Motley Fool Hidden Gems Investing - Jeff Bezos on Taking the Long View

Episode Date: January 21, 2020

“One of the time-honored traditions of investors is to play the role of skeptic.” Even in October 2000, when his company’s stock had fallen 50% in less than a year, Amazon founder Jeff Bezos was able to see profitability in the days ahead. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. With The Motley Fool Money Extra, I'm Chris Hill. A market cap of more than $900 billion today means that Amazon is not just an e-commerce giant. The company's growth in services like cloud computing, fulfillment, and even entertainment have led some to question whether Amazon should be broken up. That wasn't always the case. The Motley Fool's co-founder David Gardner talked with Amazon founder and CEO Jeff Bezos back in October of 2000, when the main questions facing the business were not about its dominance. Amazon was a pioneer in e-commerce, sure, but 20 years ago, the main question was,

is this company ever going to make any money? Is profitability an if or a when for Amazon? time. It's a win, and I think that the best evidence for that is the fact that this quarter, Q3, we had a $25 million operating profit on our U.S. books, music, and video segment. It's very clear, I think, to most observers at this point that if we hadn't invested significantly in international opportunities and new product categories, which are getting a lot of traction, then the company would be profitable today. It would also, in my opinion, have a much lower market value because of the decreased opportunity.

When you were last on our show around the first of the year, Amazon's value was about $20 billion. The value of Amazon today is around about $11 billion. How has the market changed? Why has Amazon.com and its shareholders been a little punished? Well, I think the whole sector has been treated roughly, and I think maybe very appropriately. If you look at 1999, 1999 was a year where a startup company could raise $60 million in venture capital with a single phone call and then spend half of it on television advertising in a single quarter. That is probably not rational and healthy for the market to support that kind of activity. One of the time-honored traditions of investors is to play the role of skeptic. And I think that we're seeing a much healthier, you know, we're seeing that happen today in a much healthier way.

And if you look at the long term, and I know that you guys at Fool.com share our approach to this, if you look at the long term, the longest period you can measure Amazon.com over is the three and a half years that we've been a publicly traded company. And our stock is up a factor of 20 in that period of time, even after, you know, falling three quarters off of its 52-week high. So we're very proud of the returns we generated for our long-term shareholders. And we wish that the stock chart slowly and continuously moved up and to the right in a straight line. That would be the best for everybody. But unfortunately, that's not how stocks work.