As trade and antitrust concerns continue to weigh down the FAANG group of tech stocks, investors may be wondering whether to stay away from stocks like Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN) or to jump in on the pullback. It’s the latter, says Mike Newton of Scotia Wealth, who thinks everyone should have a bit of AMZN in their portfolios, long term.
“Absolutely, 100 per cent. It is leading, it is innovative, it’s a customer-first mindset, they’re getting into healthcare, to cashier-less stores, there’s lots of exciting ideas here,” said Newton, portfolio manager and director of wealth management at Scotia Wealth, to BNN Bloomberg on Wednesday. “It’s a pastime to beat up on Amazon, but you have the cloud computing and AWS and I think this is a name that you own for decades to come.”
Amazon’s share price dropped in trading yesterday, putting the stock down almost ten per cent since the start of May and effectively erasing much of the gains recovered over the first stretch of the year. Like the other FAANGs such as Google, Apple and Facebook, the market seems to be taking seriously the threat of regulation, this time prompted by news that the US Justice Department and the Federal Trade Commission will be looking into potential antitrust and anti-competitive practices concerning all but Netflix among the FAANG group.
Roger McNamee of Elevation Partners recently spoke to CNBC to say that while Facebook and Google may be substantially impacted by impending regulation, Amazon’s business won’t be fundamentally affected.
“I think Amazon is the one where there is an opportunity for them to negotiate a reasonable settlement fairly straightforwardly. For Google and Facebook, I think that they are really poorly positioned and the real question is how hard will the government press on the opportunities it has,” said McNamee on CNBC on Monday.
As for weighting Amazon in your portfolio, Newton advises investors to be prudent.
“I haven’t started adding back into Amazon because it has always been a pretty good heavy position [in my growth portfolio]. Don’t go crazy — sometimes I say, ‘wouldn’t it be nice if I had ten names at ten per cent?’ There’s more grief that’s going to come from that, and my view is that I’d rather be a hero in losing only eight or nine or ten per cent in a terrible market than making somebody 60 when the market is up 40,” Newton said.
“I’m more interested in risk management and that’s why my percentages have always worked for me very well,” he said.
Disclosure: Cantech’s Nick Waddell owns shares of Amazon