Should I sell my Amazon.com shares?

Selling shares from my portfolio is not my forte. I think I am quite good at spotting a bargain. At least this is what I tell myself. But selling? I am either too late or far too early. I still haven’t sold Boeing. I sit on my shares in the hope the paper losses will miraculously go away. Worse. I bought more as the skid continued. And I sold Netflix after I had made a profit of 60% within a week, right into the COVID lockdown. My own success scared me. But I could have made 600% if I had held on to it until today. The crux is: if you don’t need the money, where do you want to put it next?

So if I consider selling Amazon today it is not to bag a gain of 113.5% accumulated over the last few years, or because I knew that the company has erred in its ways so disastrously that a recovery was not in sight. I think about selling because the world has changed since January 20 and I sit on far too many dollar investments, and selling Boeing with a 70% loss would be too painful to contemplate. This incapacity of mine is called loss aversion, and is apparently a flaw I share with most humans.

Amazon, which started as an online book seller in 1997 is now the world’s biggest online shop, selling $400 billion worth of consumer goods per year as a retailer and as a platform for third-party vendors. It also sells subscriptions for premium deliveries, film streaming (117 million subscribers – almost as much as Disney with 157 million) and ad space on its websites.

Half of Amazon’s profits are made with cloud services, its most profitable business. A large share of logistics is handled by Amazon itself, operating production processes, warehouses, planes and trucks. Amazon’s newest business venture is Kuiper, a satellite-based, broadband internet service challenging Musk’s Starlink network.

Jeff Bezos, the founder and largest shareholder of Amazon, is also the owner of a traditionally left-leaning newspaper, The Washington Post.

Like most US billionaires, Bezos has tried very hard to be on good terms with President Donald Trump. Bezos had donated a million dollars to Trump’s election campaign, then rubbed shoulders with the high and mighty at Trump’s inauguration party.

The Amazon founder also instructed his opinion editor David Shipley at the Post to focus opinion pieces on “personal liberties” and “free markets”. Opposing opinions “should write elsewhere”.

Shipley, a journalist with an illustrious career in the NYT, at Bloomberg and The New Republic, understood this as a pro-Trump gagging order; not quite unfounded. Only a few months earlier, Bezos had given instructions not to endorse the Democratic candidate Kamala Harris.

Note to self: when we sanctioned Russian oligarchs for not opposing Putin in his belligerence, what did we really expect from them? To walk up to the henchman and demand a stop to the craze? Or to abandon all business and to run away?

Well, not a single billionaire, with the exception of George Soros, who knows a thing or two about fascism, stood up to Trump. And none of them was at risk of falling from a balcony or exploding in a plane, or disappearing in a Gulag. At least not yet.

Well, all the bows and prostrations didn’t save Bezos from Trump’s tariff onslaught. Other than Apple, which is for the time being given a tariff dispense for its China-manufactured iPhones, Amazon is very unlikely to be given leniency. Its business model is like Apple’s also based on China-arbitrage. But its wares are not just a single item like the iPhone, but everything the world has on offer, every type of consumer goods one could think of. It is Walmart online.

Loss aversion is apparently a flaw I share with most humans- Andreas Weitzer

If Trump exempted Amazon, he might as well drop all tariffs on China. According to ECDB, 70% of all items sold by Amazon (proprietary business and third party vendors) hail from China. And half of Amazon’s consumer business is with the US, which is threatened with exorbitant tariffs, for 90 days “reduced” to 35%. What hurts is that third-party vendors pay 20% for the privilege to trade on Amazon, whose own margins are only in the single digits. Those traders will wither away now.

At first, Amazon had a plan to price the tariffs for every purchase on their website separately, to make clear that the total was not driven by greed, but dictated by law. Airlines or car rental companies do the same when they price their offers. They show taxes as distinct from their revenue, like airport fees. Of course, this would have been unacceptable to the MAGA propagandists, who claim that tariffs are not taxes paid by the US consumer, but levies on foreign exporters to be borne by them.

After great outrage by the White House spokespeople and an angry call from Trump, the project was abandoned. It would have been good tutoring for the electorate.

Amazon has always ferociously reinvested profits in its business, building warehouses, data centres, logistic hubs and new ventures like Kuiper. It is highly profitable, but refuses to pay dividends. Many analysts therefore demanded that now that the business has matured, it should start sharing profits with its shareholders. But it will need the money now. It has to expand its international operations. The more money it can make abroad, the less painful will be its US shrinkage.

Its cloud business is not affected by trade frictions yet. The picture may alter when Europe retaliates with service tariffs or tech taxes. Its wait and see.

Amazon’s low-margin consumer business can regionalise, like it did when the UK went for Brexit. Amazon has the capacity to juggle different markets and thus smoothen the fallout of the tariff massacre. What becomes too expensive for the US will be shipped to other markets. The flow of goods can be adapted flexibly to any tariff changes. And there will be many until 2029.

It is a crisis for Amazon, but not a mortal threat. I still make orders on Amazon without much ado. I still watch films on Amazon Prime. Even the Post still reads more principled than its owner. To own Amazon shares is not as toxic as being invested in Tesla. Perhaps I better stay put.

Andreas Weitzer is an independent journalist based in Malta.

This column’s purpose is to broad­e­n readers’ general financial know­ledge and should not be interpreted as presenting advice on investments or on the buying and selling of financial products.

andreas.weitzer@timesofmalta.com