Amazon and Google are 20-year holds, says this portfolio manager

FAANG stocks like Amazon and Google are pricey, for sure, but these companies are here to stay, says Rob Tétrault, senior vice president and portfolio manager at National Bank Financial, who says that stocks like Amazon should be a part of everyone’s portfolio for the next 20 years.

Shares in e-commerce behemoth Amazon have been on a tear over the past few months, posting a 36.2 per cent gain since the start of the new year (Netflix has doubled that, we should mention, gaining 73.8 per cent year-to- date). The run has many thinking that a reckoning is in order, with some harkening back to the dot-com bubble of the early 2000s, while others see the success of the FAANG tech stocks — in the face of much poorer performance by other indexes —as an unhealthy sign of too-narrow market leadership.

That’s not to mention the sky high prices, which under normal circumstances would be enough to drive away investors. Not so with FAANG, and especially Amazon and Google which both passed the US$1,000 mark last November. Tétrault says that a split is likely coming for both stocks, probably in the next year or two.

“This has been a runaway train and I think that with respect to the split, the issue is who’s going to start it between Amazon and Google,” says Tétrault, in conversation with BNN. “I think there’s the view that it’s kind of a sexy thing to have a $1,500 stock. In my view, it will split. They need that for volume, they want everyone to be able to say that they own Amazon, so I do think the stock split is coming.”

Tétrault says that regardless of the price, Amazon will be around a long time. “I do think that what they’ve got in terms of distribution, they’re scratching the surface,” he says. “This is a stock like Google that, within five years, are you going to care if you bought it at $1,400 or $1,500? Or in 20 years? This is a 20-year hold, in my opinion. This should or could form part of every portfolio for the next 20, 25 years,” he says.

Amazon recently made headlines for its moves in Asia where the company looks to challenge rival e-commerce company, China’s Alibaba. Amazon is reportedly partnering with a Vietnamese e-commerce association with aim of providing competition to Alibaba in Vietnam. Amazon made a similar expansion into Singapore last year.

Tétrault says if anything is going to wreck the party for both Amazon and Google, it’s government, which could move to break up the dominance held by these companies in their respective fields. “Google’s having a hard time over in Europe with monopolistic behaviour,” says Tétrault. “Rightfully or wrongfully, the government over there doesn’t want pure free market … That can be dangerous, so I get that.”

“In my view, that’s [Amazon’s] biggest risk because they will succeed at everything else,” says Tétrault. “In my view, they will succeed in distribution, they will succeed in integrating grocery, they’re going to succeed in all of that. The risk is the monopoly.”