Amazon.com, Inc. (NASDAQ:AMZN) is the only stock you need to own right now. AMZN stock is the perfect mix of a growth play and a defensive investment in these troubled times, and needs to be in your portfolio if it isn’t already.
Before we get deeper into Amazon stock, let’s cover the obvious: Right now, it’s hard to find an investment you can believe in.
There are plenty of reasons to tread cautiously in 2016, including the recent Brexit and the upcoming presidential election. And adding fuel to the fire is another rough earnings season, with the fifth consecutive decline in S&P 500 profits expected once Q2 numbers are reported.
Finding a stock that can swim against the currents is key — and that’s precisely what you’ll get in AMZN.
Four Strong Reasons AMZN Stock Is a Buy
Here’s what Amazon.com, Inc. has going for it right now, and why it continues to succeed, even as other investments stumble.
Amazon is a domestic retail giant: If you’re concerned about the international scene after the Brexit vote and protectionist posturing from some politicians lately, then you should probably bias towards U.S.-based companies that don’t have as much overseas exposure.
And while Amazon is indeed international, it is a powerhouse in American retail, and those sales aren’t at risk from any fluctuations in global trade. A recent report pegged AMZN stock at roughly 20% of all U.S. retail sales, and 60% of all online retail sales growth last year! If you want to insulate yourself from foreign exposure, Amazon stock is a great way to do that.
Stable cash flow from Prime: Another overlooked plus of AMZN stock for defensive investors is the reliable revenue stream from its Amazon Prime membership program, which boasts 54 million subscribers according to a recent estimate.
At $99 a year, that’s nearly $5.4 billion in cash that comes in absent of any purchases! Not only is this a great driver of capital for Jeff Bezos & Co. to invest in the business, it’s also a reliable baseline for revenue that makes Amazon stock attractive to risk-averse investors.
Amazon Web Services growing fast: Of course, let’s not pretend Amazon stock is a purely defensive play. It is an aggressively growing enterprise, evidenced best by the success of its cloud-computing arm, Amazon Web Services. AWS grew at a 64% clip year-over-year in Q1, and we can expect it to post impressive numbers when Amazon earnings drop again in a few weeks.
Furthermore, AWS remains nicely profitable with a margin of 23.5% in Q1 — up dramatically from 12.5% in Q1 of 2015! This brisk top-line growth married with expanding margins is the hallmark of a true growth company.
AMZN has no peers: Perhaps most compelling is that Amazon stock really has no equal on Wall Street. The unique mix of its streaming video biz, its Prime memberships, its retail dominance and its fast-growing Amazon Web Services arm means that this is a company insulated from any sector-wide or market-wide trends.
You’re truly investing in the vision of Jeff Bezos and the success of AMZN innovations — not macro themes or cyclical trends. In a market when things seem troubled, that kind of independence is a very attractive feature.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at [email protected] or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks mentioned here.