“Here’s how much you would have made in Amazon if you had invested $1000 ten years ago.” We often see such cheesy headlines in the financial press. So indulge me when I say this:
It took 24 years for my first Amazon share purchase to become 50x its original cost.
Unlike hypothetical situations headlined by the popular press, this 50-bagger feat is real. I bought Amazon (AMZN) in March 2000 at $3.53 (split adjusted). Today Amazon is trading at about $177.
The resulting CAGR of 17.7% is excellent even though I own some other stocks with even higher IRR over the last decade. Like Tesla (TSLA) and Meta (META).
However, very high IRRs tend to moderate over time. 17%+ annualized return over two decades is excellent.
I wrote about my journey with Amazon in April 2018. Back then, Amazon was a 20-bagger for me. Today, exactly six years later, it is a 50-bagger, 2.5 times in 6 years.
Full disclosure: this is in reference to my first purchase of Amazon shares in the year 2000. I have bought more shares (as you will see below) since then but those are not being counted here.
Since that original purchase was made in my Roth IRA (as I’ve pointed out before), I still have those shares. I am still too young to take tax-free distributions from my retirement accounts.
From here on, if Amazon grows at 15% CAGR, it will be a 100-bagger for me in five years. At just 7%, it will still be a 100-bagger in ten years. Such is the power of long-term compounding.
Lest I become too proud of myself, I’d also point out that if I hadn’t bought those Amazon shares near the top of the 2000-01 tech bubble, I could have an easy 100-bagger already. When I bought it, Amazon was trading at a lofty 19 times sales. As the tech bubble burst, it took Amazon 9 long years before it hit that high watermark again. I’d have a 100-bagger if I had bought shares anywhere in 1998. For reference, Amazon IPO’ed in May 1997 at a split-adjusted price of $0.075; today it is about 2400 times that initial price. Talk about missed opportunities!
Even after the tech bubble had burst, I could have picked up Amazon shares in 2001-02 and boasted of a 100-bagger today. But I didn’t. Or this post would have sported an altogether different title.
In reality, I didn’t buy Amazon shares again until eleven years later, in 2011. By that time, I had become interested in buying individual stocks (instead of just stock index funds). You can see my entire Amazon buy/sell history in this chart.
Those were the days when stocks were not very popular. The market crash caused by the GFC (2008-09) was still fresh in memory. Any company not producing positive EPS was treated as a scam. Amazon in 2011-2014 period was reinvesting all its profits in future growth projects and didn’t have much to show on its income statement.
Let’s go down the memory lane to 1997. Jeff Bezos published his first shareholder letter. In it, he wrote this:
We established long-term relationships with many important strategic partners, including America Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.
He obviously didn’t know this then but none of those “important strategic partners” exist today. Back then, Amazon was just a bookseller, albeit an online one. Today, it’s the world’s largest ecommerce shop, along with several other successful businesses. Bezos might not have seen all the opportunities in 1997 but he deftly steered the company toward them as they emerged over time.
A few days ago, I was reading Amazon’s 2024 proxy statement. A quote from the Amazon board struck me as insightful:
We remain committed to the structure of our executive compensation because it has worked effectively, having allowed us to […] develop our business in ways that we could not have conceived a few years earlier, including initiatives that later became AWS, Kindle, Alexa, Fulfillment by Amazon, Marketplace, and Prime Video
Clearly, no one, not even the insiders, could have foreseen all the successful business segments that Amazon would spawn since its humble beginnings in 1997. And along the way, some failures too (like the Amazon Fire phone).
So, what made me stick with the company for two-plus decades. First, I could see how good a bookseller it was (I wrote about it at length in my 2018 blog post). Then, I also liked how thoughtful and visionary Jeff Bezos was. Plus, his big stake in the company meant that he and all the shareholders were in the same boat. It was almost a no-brainer to hitch a ride with him.
Today Amazon has a new CEO, Andy Jassy, who took over in 2021. Bezos, however, is still its largest individual shareholder and also the chair of the board. Andy has big shoes to fill. He took over Amazon when its stock was at all-time high, and it has been a wild ride so far. From mid-2021 to 2024. From what I have seen from his letters, interviews, and earnings calls, he appears to be up to the task. I also like how the board has set up his compensation with a long-term view: ten year RSUs with the majority vesting in the second 5-year period. And no cash bonus and only a nominal base pay.
While it is still too early to make a judgment on his tenure, I believe Jassy is set up for driving good results for the company. I plan to hold on to my shares. Let’s see how many more years before Amazon becomes a 100-bagger for me. Onward and upward.
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