Jeff Bezos does more than just talk a good game when it comes to reinvestment
For years, investors’ one complaint about Amazon was that it reinvested all its earnings. The company’s CEO, Jeff Bezos, was clear, however, that that was the way things were going to stay. A couple of years ago, he wrote compellingly in a letter to shareholders to explain that strategic decision, noting that returns on investment are not truncated. He said when you hit a home run in baseball, that’s it: 4 runs. But when you hit one in business, you can get (the equivalent of) 1,000 runs, or more. It’s a clear and convincing argument for the taking of calculated risks.
Amazon’s strategy continues to pay off: share price up 22% so far this year
SOURCE: Yahoo Finance
New research from FactSet shows that Amazon’s commitment to R&D is more than empty promises. The company has massively outspent every other U.S. company for yet another year. Amazon spent $22.6 billion in 2017, a 41% increase from 2016 (and it was top of the list that year, too).
Amazon’s budget went on Amazon Web Services, the company’s cloud computing arm, as well as Alexa, and high tech innovations like computer vision to support its Amazon Go cashier-less store concept.
All this inward investment is great news for Amazon, which has shown the value of its approach time and time again. It’s also, however, good for the U.S. economy, as R&D spending tends to boost productivity. Maybe, in between tweets about postal service and tax, Mr. Trump should try taking Amazon’s contribution to the U.S. economy in this area into account.
Dominion holds Amazon in its Global Trends Ecommerce Fund.
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