At any given time, fear grips the market, whether it be fear of political crisis, rate hikes or inflation -- or deflation, for that matter.
But this market lives in fear of one thing and one thing only: Amazon (AMZN) , the power of Amazon to mow over whole industries. Sure, today we see healthcare rally again on the Senate healthcare bill. It seems that everyone wins, or at least every stock in the group is going up, especially the insurers and the hospitals. We've also got the oil stocks going higher. That's an "every dog has its day" story, and that's not just because my dog Bug Chevron has been getting his fair share of treats given how everyone's kicking him when he's down.
Still, though, I think the undercurrent, or I should say the undertow, of Amazon is the dominant threat to so many sectors related to the consumer in a consumer-driven economy that it's sinking whole swaths of stocks again.
If your company is in the crosshairs of Amazon, even if you might be in the tentative crosshairs, your stock gets taken down. Does a company have Amazon exposure and how much? That's the question analysts are asking on so many conference calls that it's become the major chord of the moment. Will you be "Amazoned" is the verb of the day, as in "How badly will you be hurt by Amazon Web Services or Amazon's consumer interface?"
Something's happening now, though, something no one seems to be noticing, and that's the characterization seeping in that Amazon, loved by consumers, might end up being the evil empire.
Ever since the announcement that it is buying Whole Foods (WFM) coupled with its decision to allow clothes to be tried on without being paid for and then returned easily, there is a queasy notion that Amazon has overstepped its bounds, that it's become too big and too powerful.
We all know consumers who have chatted about how they aren't sure if they like the new all-powerful Amazon, as if it is some sort of government or something except it knows your thoughts and predicts them before you articulate them.
I'm not buying that backlash. It's idle chatter because Amazon Prime is a very powerful tool that has created an irresistible bargain. I don't know a soul who hasn't signed up. I am sure that when Whole Foods gets consolidated, they will offer deals that will make it too compelling to avoid. Free eggs? Cheaper prepared food? Discounted milk? They can do whatever they want because their stock isn't impacted by their gross-margin declines. Investors have become immune to it.
I'm talking about companies where their very lifeblood has been threatened or companies that compete and have enough clout to demand fealty by suppliers.
Who is standing up to Amazon?
Let's start with Walmart (WMT) . The Bentonville, Ark., giant is the largest grocer in the country and it is not taking Amazon sitting down anymore. Sure, it bought Jet.com, which can compete on goods. That's not what I am talking about. I am talking about how Walmart is telling suppliers it doesn't want them to use the Amazon web services. It wants them to switch to the other web services, namely Alphabet (GOOGL) , Microsoft's (MSFT) Azure and IBM (IBM) . Walmart's too big a customer to say no to and it's not that hard to switch. A call to Red Hat (RHT) , which we had on last night, can make it happen.
On last night's conference call, Oracle (ORCL) said it's going to have a better offering for its customers than Amazon and Chairman Larry Ellison says his company can take on Amazon on price for his current customers. No one has really competed on price with Amazon, but Ellison is.
Then there are the investors who are saying Amazon's power is being overestimated in the marketplace. Last night we heard that Staples (SPLS) might be going private with Sycamore, a very smart private-equity firm. Staples has long been considered Amazon roadkill. Nordstrom (JWN) is very much pursuing its going-private transaction and I think buying the stock here makes sense because it will most likely be sold at a higher price. Both deals are based on the opinion that Amazon isn't going to wreck their businesses and that all the selling is overdone.
Then there are the companies that are taking advantage of Amazon. Yesterday, Nike's (NKE) stock went up because of talk it might partner with Amazon. Today, Matthew Boss from JPMorgan pointed out that Amazon is the biggest customer for PVH (PVH) , so if the potential deal with Amazon for Nike is good, then it's great for PVH. I agree; stock can go higher.
Nevertheless, there is a huge disconnect in the market when it comes to Amazon fear. For example, the biggest winner in Amazon's destruction of the mall is, by far, TJX (TJX) . It has the cash to come in and buy all this excess inventory that comes when you close a store, mark it up for less than Amazon sells and make a boatload of money. No one cares right now. But then again, no one cared when Home Depot (HD) showed you it wasn't being Amazoned and the stock went down. However, upon further review, the stock's had a nice rally. (Alphabet and TJX are part of TheStreet's Action Alerts PLUS portfolio.)
Not everything can be crushed by Amazon and the rebel competitors are striking back. Amazon better not get too cocky. The force may be with the competitors if it does.
