* Amazon's business moat is deep and secure
* The threat of increased regulation continues to exist - but it is likely to be modest in scope
* The recent share price drop has provided a good entry point on the buy side
* I am a buyer on any further weakness
Amazon is our " Stock of the Day."
For over a year I have been cautioning about the existential threat of regulation to Amazon (AMZN) . Most recently, in November, these concerns were echoed in "Is a Disruptive Amazon a Jobs Killer or a Provider of Low-Cost Products?"
However, with the shares and other FANG names down dramatically (from an August high of $2015 to $1344 at Monday's close) in the November-December Bear Market, as I wrote in my Surprise List for 2019 it is time to consider the long side of Amazon and the other FANG constituent members:
Surprise #4. Despite the Appearance of the Bear, FANG Stocks Surprisingly Prosper (Both Absolutely and Relatively) as Investors Seek Growth (at any cost) In a Slowing Economy - Facebook's Shares Rebound Dramatically:
While there is a growing consensus that FANG will lead a Bear Market lower - that is not the case as growth, in a general sense, is dear and cherished by market participants next year. Among FANG, Facebook's (FB) shares have a reversal of fortune (and is the best performing FANG stock) as the company announces aggressive management changes and moves to remedy the misinformation trap.
As more previously unrevealed information reduces her valuation, Sheryl Sandburg's special status as a female leader (in a seascape of men at Facebook and in industry) is questioned. In the first half of 2019, Sandberg becomes a sacrificial lamb and is sacked - and is forced to lean out after leaning in.
At the suggestion of Warren Buffett (who has accumulated a sizable stake in the company), former Board Member Donald Graham is named as the new, independent and Non-Executive Board Chairman of Facebook.
This unexpected move encourages FB investors to believe that the company is quickly moving to fix its multiple data and privacy issues.
Fewer (than feared) Facebook members opt out and growth in usage resumes in the back half of 2019.
FB's stock popularity (and market capitalization) increases as it becomes a more dominant holding in "value investors" portfolios - the shares trade above $200/share late in the year.
Amazon's business franchise is secure and getting stronger. The competitive threats seem surmountable and its market share appears to have a widening moat.
The company's shares have materially discounted a modest threat of heightened regulation - some of which is likely to be introduced in the months ahead.
An explanation to the particularly weak performance may be that the shares (which have been a large winner) have been at ATM for investors seeking to raise cash.
But, this early adopter can no longer be caught even if it's aggressive horizontal acquisition strategy becomes more limited in scope.
Amazon may be a surprisingly strong market outperformer next year.
I plan to buy AMZN on any further weakness.
(This commentary originally appeared on Real Money Pro on Dec. 26 at 9:04 am ET. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)