Investors are always on the hunt for the next big thing. And if there’s one thing we can all agree on, it’s that Amazon (NASDAQ:AMZN) stock is indeed a big thing. It’s arguably one of the most successful stocks of all time. And today we’ll try to identify what company might become the next Amazon-level titan.
But first we have to admit that what Amazon has achieved is astonishing. AMZN grew from a small operation to a monster gobbling up entire industries. The company now employs about a million people and yet still manages to grow by leaps and bounds. And they’ve been doing it for more than a decade.
To follow suit in Amazon’s footsteps means to be defiant. For a decade the company ignored critics who lost a fortune on short trades because they disagreed with its capital expenditure.
In reality, that capital was put to excellent use. The success of Amazon Web Services (AWS) is why we now have ‘the cloud.’ But beyond defying critics, there are a few other important ingredients necessary to mimic what Jeff Bezos and his team have accomplished.
A company will need courageous leaders, because doing something this extraordinary is beyond most ordinary people. At times they will even look crazy for attempting whatever it is that they’re doing.
The next Amazon will also need successful execution on plans regardless of extrinsic factors. This allows them to be proactive rather than reactive. At times they will need to be ruthless towards others and themselves.
The secret to Amazon’s success has a lot to do with consistency. They continue to grow approximately 28% every year, like a startup that never stopped starting up. They even occasionally announce it ahead of time, like last year when they told Wall Street they’re going to be investing all year.
Investors hated that until they loved it, in a big way. What the company has done throughout the years has never been obvious, but almost always in hindsight turned out to be genius.
Here are three stocks to buy today if you’re looking for the next Amazon:
I have a favorite, but more on this at the end. I think you will agree that all three of today’s picks are defiant, with courageous leaders and a penchant for proactively setting trends.
The Next Amazon: Shopify (SHOP)
I’ll start with the most obvious Amazon analogue, and that’s Shopify. SHOP is already focusing on e-commerce but it’s no one trick pony.
Its model is to empower small and medium business to sell online using the cloud and other tech resources. Therefore by definition they are earning income from thousands of different streams by proxy. Moreover, they will venture into further segments such as financial tools which will internally diversify exposure to completely different verticals.
Shopify is proof of the concept that “if you build it they will come,” and they indeed they have come in droves. SHOP stock price action is proof of the success.
Year-to-date SHOP is up five times more than the Nasdaq. Over the past two years, it’s up over 600%. Wall Street sees the potential so they are chasing it hard. They say the proof is in the pudding and management has shown investors they deserves the benefit of the doubt.
This stock definitely has the potential to be the next Amazon. In spite of its explosive growth, management stays in close and personal touch with its clients. They are protecting the cash-cow base from which they can expand on their successful platform.
Like Amazon, its critics see a problem with regards to profitability but here too, they are missing the point. You need to spend a lot in order to grow a lot and eventually the profitability will come. In their last earnings report Shopify grew sales an astonishing 52%, so it’s okay if they had to spend aggressively to make it happen.
Picking Uber as the next Amazon will probably raise the most eyebrows today. How could a taxi service become an AMZN?
The open secret, of course, is that UBER is most definitely not a ride sharing company. It is so much more than that since it already has many other segments, including Uber Freight, Health and Elevate to name just three. Focusing only on its biggest business means missing the point and that’s what most pundits do.
Amazon started as a bookseller then ventured into other segments. Now it has its hand in so many different industries we’ve lost track. Uber started by moving people, then things and food. Now it also has other elements and in completely different areas. In the end and under the leadership of CEO Dara Khosrowshahi, UBER will be an aggregator of dozens of profitable businesses, and it will continue chasing new ones.
This is not an overnight success story, but a long-term commitment to the thesis. We already said that management will matter and this team was recently tested by the quarantine. The world completely stopped moving, but they took the blow on the chin and survived. This is all the proof I need to know that they are indeed competent and can handle adversity. The only ingredient they need to succeed is time.
The third pick for today is investor-beloved Tesla stock. Before you call me crazy, this is the slam dunk choice by Wall Street’s own thesis on the company.
I bet you’ve heard it a thousand times: “Tesla is not a car company.” All the fans agree on this, and they often refer to it as a technology company. Eccentric CEO Elon Musk is out to disrupt as many industries as possible.
Now that he has finally taken the car maker to new levels and become a global powerhouse, I bet we will start to see more focus on the other business lines. It makes sense that the most tangible is power generation and battery production. I’ve been seeing a lot of commercials on social media about its home electricity applications.
This is important from a stock ownership perspective. TSLA has rallied 340% this year, so the shorts are drooling over the opportunity they see brewing. But they haven’t considered what I am proposing today. They’ve heard the argument that TSLA is more than a car company, but they expecting to see proof far down the line, not any time soon. If the company is pushing advertising campaigns, they could be ready to officially expand their offerings.
When that happens, Tesla stock will surge another level higher and really astonish its skeptics. I used to be among them, but was converted after I saw the progress in their cash from operations, among other things. Just a few months ago they were almost out of business and here they are today, a jewel of American manufacturers.
Of the three today, UBER is my pick for the dark horse with the most upside potential. All three will continue to grow, but this one is still under Wall Street’s radar. The current UBER stock price is only 2.7 times its full year sales this is five times cheaper than Tesla and 20 times cheaper than Shopify. Let’s keep this secret to ourselves so we can gloat later.