Amazon reveals versatile stock portfolio – a forward-looking investment?

Amazon's investment in the electric vehicle manufacturer Rivian Automotive is receiving considerable attention in the financial press, yet many investors are unaware that the e-commerce giant holds shares in nine other publicly traded companies. On July 30, Amazon announced in a filing with the U.S. Securities and Exchange Commission (SEC) that it owned shares in a total of ten publicly traded companies at the end of the second quarter. These stock portfolios were valued at $2.53 billion as of June 30. Given Amazon's immense size, however, this sum is relatively small—it represents less than 1% of the $1.76 trillion market capitalization. Therefore, changes in the stock prices of these holdings are not expected to have a significant impact on Amazon's financial performance or stock price. Nonetheless, it could make a small difference: in the second quarter, the company recorded "valuation gains from marketable securities" amounting to $443 million (mostly from Rivian stock), which accounted for 3.3% of the quarterly net profit. On the other hand, shareholders of the ten companies in which Amazon is invested could benefit should Amazon decide to acquire one or more of them entirely. However, investors are advised not to invest solely based on acquisition speculation. Which of Amazon's equity investments appear attractive? Half of the 10-stock portfolio has been traded in the past three years, hence extensive performance data is lacking. Rivian and Astera Labs went public via IPO in November 2021 and March 2024, respectively. Nautilus Biotechnology, SmartRent, and IonQ became public through mergers with special purpose acquisition companies (SPACs) in 2021 (June, August, and October). Shares of Vital Farms have almost tripled in the past year after initially declining post-IPO in July 2020. As of August 2, the stock closed at $34.93, representing a 59% gain since the IPO. Vital Farms is the leading U.S. brand for pasture-raised eggs in retail, and the strong financial performance of the company indicates that many consumers are willing to pay more for higher-quality and more ethical products. However, it is challenging for companies producing so-called commodity products to generate good long-term stock performances. Therefore, such stocks are not always recommended, though Vital Farms warrants closer scrutiny. Most of Amazon's ten holdings are unprofitable and risky. Air Transport Services and Vital Farms are the only ones profitable based on generally accepted accounting principles (GAAP), while Twilio and Marvell are profitable on an adjusted (non-GAAP) basis. Monitoring is worthwhile for Rivian, a car startup with high fixed costs but also a good chance of overcoming the odds, similar to pioneer Tesla. Key advantages include strategic partnerships with Amazon and Volkswagen. Amazon has ordered 100,000 custom-designed electric delivery vans from Rivian. Furthermore, Rivian plans a 50-50 joint venture with Volkswagen to develop new electric technologies, with Volkswagen investing $5 billion—a much-needed financial injection. In July, Rivian confirmed its production forecast for 2024 of 57,000 vehicles. In the first half of the year, 23,592 vehicles were produced and 27,378 sold. Second-quarter results are expected on August 6, with a forecasted revenue increase of one percent to $1.13 billion and an increased adjusted loss per share of $1.21.