We recently published a list of The 15 best stocks to buy according to Hosking PartnersIn this article, we take a look at how Amazon.com, Inc. (NASDAQ:AMZN) compares to the other stocks with the best buy rating according to Hosking Partners.
Hosking Partners was founded in 2013 by Jeremy Hosking as an independent partnership offering a single global equity strategy. The firm appeals to investors seeking long-term returns and innovative thinking, using a capital cycle approach to investing. The firm has a diverse equity portfolio across a range of industries, including AI, shipping and financial services. Jeremy Hosking earned an MA from the University of Cambridge and then spent 26 years as a founding partner and senior portfolio manager for Marathon Asset Management, where he helped develop the capital cycle approach to investing.
In its recent blog on shipping, Hosking Partners believes that understanding cycles in different classes of shipping and global trends is critical to successful investing in the industry. Currently, shipping (including the container, dry bulk, product tanker and LNG subsectors) represents 1.25% of the portfolio. Global trade has declined as a percentage of GDP since 2010, reflecting deglobalisation accelerated by the COVID-19 pandemic and geopolitical instability due to the Russia-Ukraine war. This trend, coupled with the energy transition, is expected to constrain future supply and increase commodity price volatility, benefiting shipping as it enables cross-border trade.
In addition, shipping is a significant CO2 emitter, responsible for about 3% of global emissions. Environmental regulations aim to reduce emissions, but uncertainty about future fuel technology is discouraging investment in new vessels, resulting in tighter supply. The industry’s efficiency, measured in emissions per tonne-kilometer, remains high compared to other modes of transport. The shipping industry is at an inflection point, with significant change being driven by AI, the energy transition and ESG considerations.
Another industry Hosking Partners is talking about is copper mining. Copper is often seen as a barometer of economic health and is critical to the energy transition, including electric vehicles, power grids and wind turbines. Wall Street banks are bullish on copper prices, forecasting significant gains. Analysts at Citi believe prices could rise above $15,000 per tonne in the next two to three years if there is a strong economic recovery, while their base case forecasts a rise to $12,000 per tonne with modest demand growth by 2025 and 2026. Bank of America has also raised its 2024 copper price target to $9,321 from $8,625, citing tight mine supply and high demand due to the energy transition as key factors.
However, some experts are cautious. Colin Hamilton of BMO Capital Markets argues that commodity markets tend to self-correct and if supply issues persist, demand could adjust, potentially leading to lower prices. Hamilton suggests that while high price targets may be temporarily achievable, demand adjustments could follow. The market could see a modest surplus due to increased mine supply, which is expected to grow by 4-4.5%. This is largely due to new greenfield and brownfield projects. Despite the short-term surplus, long-term shortages are expected as regulatory and political challenges in South America could hamper new mine development.
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Amazon.com, Inc. (NASDAQ:Amazon)
Value of Hosking Partners’ investment: USD 93,446,617
Share in Hosking Partners’ 13F portfolio: 3.45%
Number of hedge fund owners: 308
Amazon.com, Inc. (NASDAQ:AMZN) is strengthening its leadership position in AI, driven by its AWS business, which delivered an operating margin of over 37% in the first quarter and has been consistently above 30% for the past five quarters. Amazon’s first-quarter revenue rose 12.5% year over year and its adjusted earnings per share more than tripled. JPMorgan reiterated its overweight rating on Amazon with a price target of $240 after analyzing the U.S. e-commerce market. The research shows that Amazon is on track to overtake Walmart as the largest U.S. retailer by 2024, with long-term e-commerce penetration potentially exceeding 40%.
This stock is very popular among customers due to its extensive diversification in AI and cloud computing, making its products and services the first choice among cloud users. During Amazon.com, Inc.’s (NASDAQ:AMZN) second-quarter 2024 earnings call, CEO Andy Jassy highlighted the rapid growth of the company’s AI business, which is driven by Amazon’s belief that no single AI tool can dominate the market. Therefore, Amazon offers a wide range of AI tools, ensuring that developers and consumers can find the best solution for their needs.
The company’s impressive growth and rising investor interest are also driven by the profitability of its Amazon Web Services (AWS) business. Rising demand for AWS, particularly due to Amazon’s investments in generative AI projects, led to an 18.8% year-over-year increase in AWS revenue in the second quarter.
Diamond Hill Select Strategy stated the following about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 Investor letter:
“Our largest single contributors in the second quarter included Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost from growing optimism about demand for AWS as Amazon customers’ investments in generative AI projects continue to grow.”
Total AMZN 3rd place on our list of the best stocks to buy according to Hosking Partners. While we recognize AMZN’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than AMZN but trades at less than 5x earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
