(B)(N) AMZN Amazon.com Incorporated

Drama. Amazon.com Incorporated is a marketing juggernaut – buy it used or hard to find, or buy it new, it’s off the planet for the consumer experience (Reuters, April 24, 2013, Analysis – Sleeping ad giant Amazon finally stirs). Amazon has ramped up its debt and upsized its inventory and plant significantly since the last time we looked at it (please see our Post, with (B)(N) BBY Best Buy Company Incorporated, January 2013) but that hasn’t dampened investor enthusiasm for the stock which is up +5% since December and it’s also up more than +40% since this time last year and remains firmly in the Perpetual Bond™ despite a volatile market for retailers. Please see Exhibit 1 below, and our recent Post, The Wall Street Put, April 2013, for an overview of even more of the S&P 500 up-companies these last few months (of which we already knew, last year).

It doesn’t pay a dividend but the market value is $120 billion and the same mind that created it and virtually invented e-commerce (in his garage, of course), Mr. Jeff Bezos, is still at the helm. Our estimate of the downside risk due to volatility is minus ($25) which would put it way below the current Risk Price (SF) of $262, and there are also stirrings of new legislation that would affect sales tax collection from online retailers. In self-defense, it seems merely prudent to buy the July put at $260 for $12.30 today AND the cost of that can be offset by a sold or short call on our long position at $275 for $13.40, so that for a gain of $1.10 per share today ($12.30 less $13.40), we can be assured of no less than $260 and no more than $275 for the next few months while we wait for more information, and read War and Peace on our Kindle.

Exhibit 1: (B)(N) AMZN Amazon.com Incorporated – Risk Price Chart

(B)(N) AMZN Amazon Incorporated – April 2013

Amazon.com Incorporated serves consumers through its retail websites and focuses on selection, price, and convenience. The Company’s products include books, music, computers, electronics, home and garden, and numerous other products.

(Please Click on the Chart to make it larger if required.)

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation.

Stock prices that are less than the price of risk are “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”. On the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information. Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more details.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.