Call it faith-based investing, as in I have faith in Jeff Bezos, so I am going to buy shares in his company, Amazon AMZN.
Last night, Amazon rocked the investment community by revealing it has aggressive plans to spend in order to win over parts of the world that it hasn't conquered as well as to boost initiatives that exploit artificial intelligence, like Echo, the hands-free speaker you control with your voice.
On Wall Street, you don't spring unexpected plans about the need to spend without expecting a backlash of skepticism. For example, earlier this week, Kevin Plank, CEO of Under Armour UA, talked about the need to spend to grow and gain share. Immediately, his stock plummeted because, to Wall Street, that spend implies lower gross margins and therefore lower profitability. It also means that perhaps demand isn't as strong as one thought, hence the brutal decline in the stock -- down 25% for the year -- as investors decide to pay less for the company's shares. (Amazon and Under Armour are part of TheStreet's Growth Seeker portfolio.)
That's why the decision announced on Amazon's call to beef up spending freaked out many investors and has caused today's substantial decline. I buy that logic for pretty much every company, every company save Amazon. Time and again, I have seen this company's stock rise and then have a chunk of the rise repealed when, periodically, the company sees an opportunity to spend where the return on investment could be huge. Bezos does not want to cut off his nose to spite his face or please Wall Street. He recognizes that he can't be constrained by what Wall Street wants, which is typically a predictable earnings stream driven by predictable spending. Nor can he bother with the thinking that he might not be spending as much if things weren't slowing down worldwide.
He takes his own counsel and he acts on it.
People often look back and say, why didn't I own the stock of Amazon given how much I like Amazon Prime or love the convenience or are impressed with the time of delivery and its superior customer service.
The answer? Simple: because they get scared off after days like today. They can't stand the volatility. But that has always led to this kind of knee-jerk shake-out, which makes it too hard to own.
Here's what I say: You either have faith in Bezos or you don't. You either buy into his amazing success or you stick with something less volatile. For me, though, this decline is simply one more buying opportunity in the long upward climbing road that Amazon's been traveling.
Now that doesn't mean you have to go buy it Monday. We have real sellers out there and they might not be done unloading the stock. But it does mean you've got a sale going on and you have to ask yourself, would you take advantage of a sale on Amazon? If you would, then you might want to take advantage of a sale after what has amounted to, over time, a very predictable pattern of accelerated spending precisely when the opportunity most knocks.