In the fast-paced world of finance, critical data releases flood the streets of Wall Street regularly. Among the monthly inflation and jobs reports and the quarterly earnings disclosures from the titans of finance lies a crucial data dump that might just slip by unnoticed.
August 14 marked a significant event: the filing deadline for Form 13F with the SEC. This form provides insight into the stock-picking activities of institutional investors and well-heeled asset managers, showcasing the moves made in the latest quarter.
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The period reflected a flurry of activity for billionaire Philippe Laffont at Coatue Management. Managing over $25 billion across 74 holdings, Laffont’s hedge fund focuses primarily on thriving tech stocks.
Amidst his trades, a clear pattern emerges: Laffont has significantly reduced his position in former top holding Nvidia while increasing his stake in a dual-industry leader.
Laffont’s Shift Away from Nvidia
By the close of March 2023, Coatue Management held nearly 50 million split-adjusted shares of Nvidia. However, within 15 months, this figure plummeted by 72% to around 13.7 million shares, pushing Nvidia down from the top holding spot.
The notable rise in Nvidia’s stock price, with a 750% surge since the start of 2023, possibly triggered Laffont’s profit-taking strategy as the company’s market value soared by $2.7 trillion—an unprecedented ascent.
Yet, beneath the surface, potential signs of an AI bubble bursting and a lack of insider activity within Nvidia may have influenced Laffont’s decisions. Expected competitive pressures further cloud Nvidia’s future outlook, adding to the rationale behind the divestment.
As Nvidia faces tough competition and internal developments from key clients, Laffont sought greener pastures, diverting his attention and investment to a different player in the market.
Laffont’s Embrace of a Bargain in Amazon
While reducing his exposure to Nvidia, Laffont’s fund increased its position in Amazon—a historically inexpensive dominant player. The addition of over 700,000 shares brings Coatue’s total holding to approximately 10.77 million shares, representing more than 7% of invested assets.
Amazon’s undisputed e-commerce prowess, coupled with its significant market share in the online retail landscape, paints a picture of stability and growth potential. Laffont’s move to bolster his Amazon position reflects a strategic pivot towards a stalwart performer in two crucial industries.
Image source: Amazon.
The Rise of Amazon in the Clouds
Amazon’s Dominance Over Walmart
Amazon surges ahead, planting its flag as the standout leader, a towering 31 percentage points above retail juggernaut Walmart in a commanding display.
The Power of Amazon Web Services (AWS)
Casting a wide net, Amazon’s e-commerce facade attracts over 3 billion monthly voyages. Yet, the true powerhouse lies in the shadows – Amazon Web Services (AWS), a thriving hub driving Amazon’s success story. Recent figures divulge AWS staking its claim with a lion’s share, a towering 33% slice of the global cloud infrastructure service platform pie in the June quarter. Leaving competitors trailing in its wake, Microsoft’s Azure settles for a paltry 20% market share in the cloud landscape.
AWS: The Money Maker
Like a jug of honey, AWS is a consistent source of sweet nectar, contributing a substantial chunk ranging between 50% to 100% of Amazon’s operating income each quarter. It is the architect of Amazon’s flourishing cash flow, lavishing the company with growth prospects aplenty.
Ad Services and Content Domination
Amazon’s realm extends beyond the clouds with its stronghold in advertising and subscriptions. Welcoming over 3 billion guests monthly, Amazon commands an iron grip on ad pricing, bolstered by a burgeoning content trove. Recent wins in the streaming arena, securing rights to marquee sports events, further raise the Prime subscription’s allure.
Valuation: Amazon’s Strategic Advantage
Mark your calendars – Amazon’s stars align with a historically low valuation. Investors once coughed up a median of 30 cash flow multiples for Amazon shares in yesteryears. Fast forward to present-day, a bargain bonanza beckons as Amazon shares trade at under 13 times cash flow for 2025. A compelling narrative unfolds, poised to eclipse its competitors on the bumpy returns highway.
The Bottom Line: Amazon’s Winning Streak
In a showdown that pits Amazon against Nvidia, the odds tilt in the former’s favor. Bolstered by a blend of prowess in the cloud, a strategic ad play, and a rock-bottom valuation, Amazon emerges as the frontrunner in the eyes of discerning investors like Laffont. With each puzzle piece sliding into place, Amazon charts a course towards the undisputed zenith of the returns echelon.