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Buy or Sell AMZN? What Two Top Hedge Fund Managers Have to Say

Goodreid Investment Counsel’s Gordon Reid believes 2022 will be Amazon’s year. Blue Whale’s Stephen Yiu thinks differently. Today the Amazon Maven compares an AMZN bull versus an AMZN bear.

Top investment firms such as Goldman Sachs, Wells Fargo, and Bank of America are bullish on Amazon stock for 2022. Now it's Goodreid Investment Counsel’s turn: CEO Gordon Reid has joined the club of AMZN bulls, naming the stock his top pick for 2022.

Blue Whale Growth’s Stephen Yiu disagrees. After holding  (AMZN) - Get Amazon.com, Inc. Report shares for four years, the portfolio manager has just sold his entire stake on the company.

Let's compare both investment theses and give our take on what investors should expect for AMZN this year.

Figure 1: The Amazon Spheres in Seattle, WA.

Figure 1: The Amazon Spheres in Seattle, WA.

(Read more from Amazon Maven: Forbes On Amazon: 3 Pros And 3 Cons About Splitting The Stock)

The Bull Case

Gordon Reid is confident Amazon’s R&D investments throughout 2021 are about to pay off.

“You can see the formula that Amazon has employed over the last number of years. There’s a cadence to it,” he said. “They make huge investments — they have about $20 billion a year going into R&D — and so they make those investments and then they reap the benefits. What they’ve done in 2021, for example, is they’ve put a lot of money into new fulfillment centers which is going to increase their ability to deliver packages even faster.”

In Reid’s opinion, Amazon’s poor performance in 2021 was caused not by losing its fundamentals, but by a combination of (1) tough year-over-year comps and (2) shoppers returning to brick-and-mortar stores after social restrictions eased. If so, we should witness the stock regain momentum as we move deeper into 2022.

The Bear Case

On the opposite side of the Amazon spectrum, Stephen Yiu is not so optimistic for the e-commerce giant. He believes the retail industry will continue to face unfavorable macroeconomic conditions. “We’ve never liked the retail business, and now we like it even less because of the inflation narrative,” he said.

Not even AWS’s high growth projections and hefty profitability were enough to make Yiu stick to his investment. The expert believes Microsoft Azure and Google Cloud present better growth perspectives. According to Marketwatch, both Amazon rivals are in the top 10 holdings of the fund.

Wall Street’s Take

The Fed has initiated its tapering policy as inflation remains a major concern for 2022. Still, we could argue inflation is a transitory effect, as the last CPI index came in line with analysts’ estimates. In this case, we believe the e-commerce industry should remain growing for the long term.

For Wall Street, Amazon is a unanimous strong buy: Of the 27 top analysts covering the stock, all of them give it a strong buy recommendation. Target prices range from $3,800 to $4,700, with the average price at $4,160 — a 29% upside.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Amazon Maven)