Amazon AWS – The Everything Store for Ente

Investment Analysis Clubs Saul’s Investing Discussions
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An interesting podcast I stumbled upon:

https://ark-invest.com/research/podcast/amazon-aws-enterpris…

Generally, I like ARK Invest and their CEO Cathie Wood. They seem to be very Foolish and true Rule Breaker Investors. So probably worth following (I haven’t listened to more than the above episode yet).

In the podcast, they basically argue that Amazon will do in Enterprise Computing what they have done in retail, ie take over the market vertical by vertical. They didn’t go too much into details but actually mentioned MongoDB by name (and basically laughing about the question if they are actually competing against AWS). They also talked a lot about AWS going into the hybrid cloud via their VMWare partnership – certainly, something to note for Nutanix investors (though nothing new).

Best wishes
Niki

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You can go to ARK website and sign up for their updates and get a list of their buys and sells daily.

Rob

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Niki - I get the attraction to Wood, but personally, I don’t buy it. The Tesla $4,000 call is all I need to see. I invested in her fund for a few weeks and it just didn’t sit right with me.

I am only posting here on this because Tesla recently sparked a 100-post thread and ARK comes up all the time.

I think Tesla, ARK and even Dorsey are antithetical to this board. The Saul method is a philosophy based on 1) drilling down to the most essential information 2) forming theories based on irrefutable logic and 3) investing in companies telling the clearest, most simple stories. By “story” I mean “we will go from 1B to 5B by doing A, B an C.”

I predict Square will fall completely out of favor here shortly. I sold all my shares this morning.

When you think of AYX, TWLO, MDB, TTD, the quality of the product/service and the growth does the talking. Not moonshot predictions, Tweets, celebrity engagements, misadventures of CEOs with big social causes, etc.

I once did “Shyster Capital Management” as a comedy bit for the Fool. Our slogan was “A Helping Hand in Your Pocket” and I made outrageous calls like Netflix was worth a trillion, Facebook was worth zero, etc. I had to kill the bit because people were taking me seriously! No joke. I find the connection between ARK and Shyster Capital too close for comfort. Make huge claims, get on every media outlet, get investors worked up into making vast fortunes, pocket millions off commissions.

To each his/her own, but for me the more invisible a leader, the more they let their actions do the talking, the better. Since we all have so many stocks to choose from, sometimes we just have to use our gut to weed out companies. The second I heard New Relic was an anagram for CEO Lew Cirne, sorry, done, deal breaker. My lessons is if my gut not into it, no matter how many on this board, including Saul love it, then it’s a terrible idea to own as I will get shaken out on downturn. Conviction must be high.

Anyway, bottom line: I think this board is a better board without Tesla, ARK and soon Dorsey. But I realize many love Square and I do respect that.

Fool On,

BD

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Dan,

I didn’t want to come across like a huge Cathie Wood-fanboy. I also agree that her $4,000 Tesla prediction is a bit insane. But that’s just marketing. The Motley Fool basically does the same thing and still, we value their insights and analysis very much I would say.

I wouldn’t follow all of ARK’s recommendations. Nobody should. Like every other investor on the planet, I like Warren Buffett a lot, but then again, I would never touch Bank of America or Wells Fargo or Coca-Cola shares. ARK has an interesting investing philosophy, certainly not Saul-type, but nevertheless innovation focused, which is a big theme among Foolish and Saulish investing, in my view.

I think there is no harm in listening to and reading their research. I find it interesting and I’m sure many here do too. In this case, it actually related to the competitive threat of AWS to enterprise software vendors, like MongoDB and Nutanix, which could be of interest for our community. I obviously triggered some Pet Peeve of yours, so sorry for that. :wink:

Best
Niki

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I have been quite a fan of ARKW up until now, lately because they hold some of the names that have been discussed here, and despite the TSLA holding. After all they were right to hold BTC through 2017/18 whilst I was saying I wouldn’t touch it with a barge pole.

However now I am struggling to understand why the 20% drop in the ARKW price on 27 Dec without a corresponding weighted average drop in the constituents of this fund. Perhaps I need to seek an explanation directly from ARK as I cannot make sense of this circa $10 drop

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However now I am struggling to understand why the 20% drop in the ARKW price on 27 Dec without a corresponding weighted average drop in the constituents of this fund. Perhaps I need to seek an explanation directly from ARK as I cannot make sense of this circa $10 drop

Looks like they paid a dividend on that date?

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Hi Niki,

I thought the Podcast was fairly interesting and thought provoking. The thesis seems to be that AWS Outposts eliminate the key competitive advantage that was allowing Google and Microsoft to compete. Thus Amazon’s cloud dominance is set to expand.

The idea about Amazon ending up as the enterprise everything store is, I think, a fair thesis. Fair in the sense that it is within the realm of possibility. I’ve been thinking about this a bit. The podcast laughed off MongoDB as a competitor and elastic sees Amazon as enough of a competitor that they have a blog post about why Elastic’s own product is better (https://www.elastic.co/aws-elasticsearch-service).

So putting myself in the shoes of someone at an enterprise who needs to make a decision, I’ll weigh the options.

First, getting everything through Amazon simplifies my accounts (1 point for Amazon)
Second, Amazon, may be able to integrate its software offerings with one another as well as it’s cloud architecture, creating functional advantages for the user (1 more speculative point for Amazon)
Third, The smaller players have more velocity (to use a term I learned recently from the Nutanix post). Updates are more frequent and the product features will probably be better than Amazon’s offerings.

If I were in charge of an enterprise, I would be more concerned with getting all the firepower that I can from my software, rather than making my accounts more conveniently integrated. So I think that the smaller companies have the edge. And their revenue growth numbers don’t lie. Also, the market doesn’t seem to care about Amazon competing with MongoDB. Mongo’s share price hasn’t reacted to that at all.

However, I think it’s worth noting that Amazon is trying to make its way into the enterprise software space. One thing I will pay close attention to are margins. Bezos has famously said, your margin is my opportunity, and enterprise software stocks have plenty of margin that can be eaten into. If Amazon offers low cost options, those options may be appealing even if they are not as feature rich, especially in a worsening economy. Then again, switching costs are high, and if the smaller companies can grab the market share now, they are less likely to lose it in the future.

If AWS is the operating system of the cloud, I would expect the end result to somewhat mirror what happened with Microsoft and Windows. Microsoft created some killer apps for its operating system that nobody was able to compete with (MS Office). But there was still plenty of space for other software companies to succeed by launching their products on Windows. Adobe hit the big time. Lotus Notes is forgotten to history. Who will the software winners be this time? That’s what we’re here to figure out. And I think Saul has the right idea to look at the numbers to see what’s going on.

All that said, I think this adds to my conviction for companies that aren’t as closely tied to competition from AWS enterprise software. Twilio and Alteryx, for example, seem to be much less threatened than Elastic and MongoDB. I wonder about some other names. Could Amazon ever compete with ZScaler or Okta? I’m not techie enough to really have a sense of how it all works.

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