As I type, Amazon (NASDAQ:AMZN) shares are up 12% today (31 October), and that’s good news for a couple of FTSE 100 investment trusts. Especially as Amazon stock is now at a new all-time high.
These are benefitting
The FTSE 100 investment trusts alluded to are Pershing Square Holdings (LSE:PSH) and Scottish Mortgage Investment Trust (LSE:SMT). Both have Amazon as one of their top holdings.
To be fair, that wouldn’t be hard for Pershing Square, which gives everyday investors access to Bill Ackman’s hedge fund portfolio. By default, any stock that makes the cut is a large position because it rarely holds more than 12.
Ackman bought 6,324,031 Amazon shares in Q2 this year. So this position, which was worth more than $1.2bn at the time, is getting a nice bump today. He also loaded up on Alphabet in early 2023 (up nearly 200% since).
As for Scottish Mortgage, it first invested in Amazon back in 2005. And even though it has sold off shares periodically since, including in the last 12 months, the tech behemoth founded by Jeff Bezos is still a top-five holding.
Very strong quarter
Scottish Mortgage says investors “underappreciate…how long Amazon’s growth could endure, with multiple growth opportunities in AI, advertising, original content, and grocery delivery still in their early days“.
In Q3, we saw evidence of this. Sales in North America increased 11% year on year to $106.3bn, while international sales rose 14% to $40.9bn. Within these segments, advertising revenue surged 24% to $17.7bn, becoming a bigger piece of the pie.
The standout performer though was AWS, its cloud computing division, where sales jumped 20% to $33bn.This was AWS’s fastest quarterly growth since 2022, topping analyst estimates for about 18%.
CEO Andy Jassy said it continues to enjoy “strong demand in AI and core infrastructure”. As such, Amazon expects to spend a whopping $125bn on capital expenditures this year, up from a previous estimate of $118bn.
Looking ahead, a recession would be a challenge for Amazon’s retail operation, while competition from Google Cloud and Microsoft Azure isn’t going away for AWS.
All told though, this was a very impressive quarter from a world-class company. With tonnes of optionality across e-commerce, cloud services, AI, advertising, and a new satellite internet business, Amazon has many ways to keep winning.
I think the stock is still worth considering, even at an all-time high.
Back to the trusts
What about Scottish Mortgage and Pershing Square? Well, there’s more to these trusts than just Amazon, of course. And that adds risk as well as opportunity.
For example, in Q2, Pershing Square also had 8.8% of its portfolio in Chipotle Mexican Grill. And this restaurant stock has cratered 23% this week after posting poor Q3 sales.
Meanwhile, Scottish Mortgage has a large holding in Meta Platforms, which has also fallen this week. So other stocks in their portfolios might always drag on overall performance
On top of this, investment trusts can trade at a discount to their net asset value. Pershing Square’s discount is 26%, while Scottish Mortgage’s is 10.5% (both could widen during market sell-offs).
Still, I’m inclined to see both trusts trading at a double-digit discount as more of an opportunity to consider buying them. Both have excellent stock-picking track records, as Amazon is proving today.
