Billionaire Bill Ackman is the star hedge fund manager known for his well-timed trades and savvy stock picks. Investors can gain exposure to his investing strategy through Pershing Square Holdings, which is an investment trust listed in the FTSE 100.
One thing Ackman is famous for is running a very concentrated portfolio (sometimes less than 10 stocks). Recently, I looked at the fund and ran a thought experiment: which stock would I own above the others for the next 10 years?
A true tech juggernaut
That stock is Amazon (NASDAQ: AMZN), and there are numerous reasons I’d feel comfortable having my money tied up in this business for the next decade.
First off the bat, Amazon has an increasingly diversified business model. It’s the global leader in e-commerce, with hundreds of millions of active users. Its Prime subscription brings in reliable recurring revenue, while keeping customers like myself loyal.
In my quiet cul-de-sac, there are delivery vans pulling up all day long (and increasingly evenings). And the majority of the boxes I see are those familiar brown ones from Amazon. I doubt my street is an outlier.
Meanwhile, Amazon’s vast global user base extends across Prime Video, Kindle, Fire TV, Twitch, Alexa, and more. This valuable digital real estate is a magnet for advertisers.
In Q2, ad revenue surged 22% to around $15.7bn, making it the company’s fastest-growing segment for the second straight quarter.
Then there’s its AWS business, which is the global leader in cloud computing. Now on an annualised run rate of approximately $123bn, it accounted for 58% of Amazon’s operating profit last year. CEO Andy Jassy thinks we’re still in the early chapters of AWS’ long-term global growth story.
The company is also very profitable, with over $100bn of net income forecast for 2027 (up from $30bn in 2023).
Risks
Of course, I wouldn’t expect it to be plain sailing for a decade. One risk I see is increasing scrutiny from regulators, especially in Europe.
Also, while I see most shoppers remaining loyal, competition is on the rise from the likes of Shein, Temu, and possibly TikTok Shop.
Nevertheless, Amazon’s diversified model, high-margin businesses (AWS and digital ads), and relentless investments for growth give me great confidence in its prospects.
On the buylist
Given all this, you’d be forgiven for thinking that Amazon is one of my own top holdings. However, I don’t even own shares (yet).
Back in April, when the market went into a brief meltdown thanks to Trump’s tariffs, I seriously considered Amazon at around $175. But I only had so much cash to deploy, and the handful of picks I made (including Shopify, Roblox, and Nvidia) have done incredibly well since. So I’m not necessarily feeling deep pangs of regret.
Now at $229, Amazon stock isn’t as cheap as it was in April. However, at around 31 times next year’s forecast earnings, it doesn’t look particularly overvalued to me. It’s a notable discount to previous years, and Amazon’s earnings are likely to be significantly higher in the 2030s.
Doing this thought experiment has revealed to me that I want this stock in my portfolio over the next decade. So I’m going to start building out a position, taking advantage of any double-digit dips in the share price along the way.
