Phil here – Today I am delighted to share the first ever guest post on the blog from my colleague and Portfolio Manager at Huber Financial Advisors, Danny Noonan. No, not this Danny Noonan. This Danny Noonan. Go ahead and follow him on Twitter. I hope to share more stuff like this from Danny in the future. Enjoy!
Last month, Amazon became the second company in history to pass the $1 trillion threshold in total market cap. The first company to do so was Apple, who did it only a few weeks prior.
Jeff Bezos has often cites his success as “half luck, half good timing, and the rest brains.” Taking that quote in stride from the world’s richest man, it may seem like fake modesty. It’s easy to be modest when you haven’t paid $30 to check your first bag on American Airlines in a couple decades! But while speaking at an event a few weeks ago in Washington D.C., Bezos reminisced about the “old days.” He spoke with a vivid memory of the days he was driving his Honda Civic to the post office to drop off packages, hoping one day Amazon could afford a forklift.
The most interesting takeaway from his talk was that from the founding of Amazon, Bezos relentlessly prioritized a few things and built a business around it. Only a couple things mattered, not everything under the sun. In retail, customers want vast selection, low prices with the ease and speed of delivery. That statement held water in 1998 and should continue to hold water in 2028. Since the company was founded in 1994, the focus on day one has remained the focus as they roll through year 25.
Tying in an investing analogy, which is exactly what Bezos was doing himself in the early days, you don’t have to be an expert on everything. Bezos was a former computer engineer working in asset management turned internet book salesman. While he had grand visions for Amazon’s future beyond books, even at that time, all his plans were leveraged to delivering the best consumer experience possible. A jack of all trades is a master of none.
Thinking along these dimensions in investing, a narrow focus and a complete disregard for most things will serve you well.
- Lacking a passionate opinion on the valuations of the “FANG” stocks is perfectly fine.
- Being uninterested in the Federal Reserve’s effect on the U.S. stock market is also fine.
Famed Fidelity money manager Peter Lynch often quipped, “If you spend more than 13 minutes a year analyzing economic and market forecasts, you’ve wasted 10 minutes.”
While not advocating for being oblivious to current events, an obsession with the news cycle is actually counterproductive to investing successfully. There will never be such thing as perfect. Any great result will have volatility scars. Jeff Bezos did not take Amazon to the trillion dollar mark in a straight line. In building the world’s most consumer centric company, many things were tossed in the dumpster along the way. Remember the Amazon Fire phone? It didn’t work out. After a $200 million dollar write down on their phone inventory, Amazon accepted its failure and moved on to new things, some of which will inevitably fail bigger and harder than the Fire phone.
Mistakes happen. And to clarify, that statement is not intended to be all encompassing – if you’ve made an investment over the phone in an African gold mine recently, it might already be too late for you. But point being, recognizing a mistake and learning from it is exceedingly rare. As long as Bezos isn’t six feet under, another Amazon cellphone seems unlikely.
Investing requires the courage of your convictions. You can’t be blown every which way by whatever style or fad is prevalent. More than ever, you have to believe in your strategy, especially when few others seem too.
You don’t have to know everything. A couple simple ideas tied together carry most of the freight.
P.S. Jeff – you have my permission to buy a forklift.