Today, Rocco Pendola, in a message to all Amazon.com (AMZN) bears in one of his articles in TheSteet.com addressed me directly as one of those bears. This article will be my answer to him and those bulls that think like him.
Rocco Pendola stated:
I would be shocked if one of the biggest AMZN bears, somebody named Paulo Santos, who makes Seeking Alpha look like Seeking Beta, has any cash left to eat. Unless you're Donald Trump (or Jeff Bezos), how can you possibly remain solvent shorting this stock?
My first article on Amazon.com was published on Seeking Alpha on Monday, October 31, 2011. This article was written during the weekend before, Amazon.com closed at $217.32 the previous Friday. As of today, Amazon.com trades at $237, a "full" 9.1% higher. At most, Amazon.com hit $261 or so, 20% higher. It has also traded as low as $170 since then, 21.8% lower.
I know Rocco doesn't care about numbers, he said it himself here in the same article:
Sometimes I like to use numbers; more often than not, I don't. That's because, increasingly, they mean little in this stock market.
But does Rocco think that having a position go 20% against him - never mind that I've closed this position several times close to $170 and re-opened higher - is something that can wipe out someone and leave him without any cash to eat? Is Rocco Pendola's idea of risk management to stick all his eggs into the same basket? Hasn't he noticed that I write - and trade - many other stocks and assets?
Rocco seems to dismiss, like many other Amazon.com bulls, the fact that Amazon.com fundamentals keep getting worse. He's deriving his opinion not from the evolution of the company, but from the evolution of the share price. Yes, Amazon.com has gone against me during 2012, but guess what, I was more on the ball regarding its fundamentals than almost every analyst out there. Because I said Amazon.com would be producing losses when everyone else only said rivers of honey flowed as far as the eye could reach. And what did Amazon.com report yesterday? Losses. And it guided lower as well, to the point where 2012 as a whole might actually end up in the red.
I know Rocco, and many other Amazon.com bulls, don't care about earnings. But how many other $100 billion market capitalization stocks do you see producing losses (and these are operational losses, most of them, not one-off charges)? I'll make a list of the stocks under those conditions: Amazon.com.
Now, this was not the only thing wrong with this article. Indeed, one of the things that drove me to write (so much) about Amazon is the continuing misinformation that hits the media regarding the company. And Rocco just put forward his two cents into that misinformation hat. For instance (bold is mine):
Amazon doesn't use talking points (other than for competitive reasons). It states with zero hesitancy that it's a spending a ton. It breaks down where the cash goes. The company provides reasons for strategy. And, refreshingly, it tells everybody it's really not sure when the spending will slow.
Transparency. Visibility. Long-term opportunity. And a company not sitting on its cash. It's reinvesting it regardless of what's happening in Washington, Europe or on Wall Street.
Oh it does? Transparency? Then pray tell where. Break down where the cash goes. Because that - along with the numbers on sales of Kindles, the impact of sales taxes, the impact of individual countries, etc - is nowhere to be found. So basically Rocco, like many others before him regarding Amazon.com, simply wrote some fiction which he probably believes himself. Don't be worried, though, I've seen a lot worst, like articles saying how incredible Amazon.com's earnings are and how much they're growing.
Rocco's piece lacks the most basic intuition regarding how much Amazon.com has moved (not really much, except if you go counting movements from bottoms). It's also factually inaccurate when it addresses what and how much Amazon.com reports.
It's the kind of piece you usually find defending an investment in Amazon.com: Short on facts and reasons for a rational investor to invest in - long in attacks on those who hold the opposite view.
Disclosure: I am short AMZN.