Apple and Amazon won’t be slowed by a trade war, this investor says

The tech sector has had a rough go of it over the past couple of weeks, with share prices for the FAANG giants tumbling amid trade and regulatory concerns. And while the pullback could make for a buying opportunity, investors are faced with the quandary of whether to pick Apple (Apple Stock Quote, Chart NASDAQ:APPL) or Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN)

No problem, says fund manager John O’Connell of Davis Rea, who argues that they’re both winners.

After a rough Q4 last year, it looked as if tech was back to its market-leading ways, as all of the FAANG names posted impressive gains over the first stretch of 2019. But a recent downturn has made it less clear when or even if the big tech stocks will be returning to highs set last summer.

Headwinds are blowing in from a number of directions, including calls for the break-up of companies like Facebook and Alphabet and investor worries over trade tensions between the United States and China.

Yesterday, the US Supreme Court ruled that users of the Apple iPhone can proceed with a class-action lawsuit against Apple concerning its App Store. The claimants argues that Apple, which charges app developers a 30-per-cent commission on sales, effectively creates a monopolistic environment allowing for price inflation.

At the same time, fears of a ramp-up in the US-China trade war have put pressure on Apple’s share price, as the company has both assembly plants in China as well as a large market for its products in the Chinese economy.

For its part, e-commerce king Amazon has been the recipient of increasing anti-trust criticism and calls that the company is gaining too much control over the consumer marketplace, both in the US and globally.

But O’Connell says investors shouldn’t be too worried about either regulatory challenges or trade issues since both Apple and Amazon have the smarts to keep growing, regardless of the hurdles put in front of them.

“Own them both,” says O’Connell, CEO of Davis Rea, to BNN Bloomberg on Monday. “They’re both really well run companies on the forefront.”

“Apple is a great, big and powerful company that works out its problems. If Apple’s [share price] gets beat up because the Chinese introduce some significant tariffs or ban the imports of Apple —that’d be the best way for the Chinese to get the Americans’ attention— then I would buy Apple, hand over fist,” he says.

“I just don’t think that this competition stuff, it’s very un-American and it’s not even accurate, so I just think that Amazon has loads and loads of runway here, as does Apple,” he says.

O’Connell says Amazon’s breadth beyond just its online store is what will allow it to keep getting bigger and better.

“Cloud computing has been a really rapidly growing business and content business is going to be big — I just don’t think that we’ve even scratched the surface in terms of what Amazon could be doing in entertainment,” he says.

“I think that Amazon has loads and loads of runway here, as does Apple,” he says. “We own a larger chunk of Amazon than we do Apple right now and that’s because it has performed better over the last couple of years.”

Currently, Amazon’s share price is up 21 per cent year-to-date while Apple is up 18 per cent.

Disclosure: Cantech’s Nick Waddell owns shares of Amazon.