Despite the global stock market crash in March, not all stocks have taken a hit. Certain sectors, including technology, have actually performed very well year-to-date. Take the NASDAQ exchange in America. It mostly lists technology firms, in contrast to the FTSE 100, which has a very diverse range of constituents. The NASDAQ is up around 15% this year, despite the March sell-off. Within the index, Amazon (NASDAQ: AMZN) shares have helped lead the charge.
Can I buy US shares in my ISA?
The above is interesting information, but you might think this is irrelevant for a UK-based investor. This isn’t true. Not only can you easily buy Amazon shares and other US firms (think of Tesla, Apple etc), but you can put them in your ISA. Check with your provider as this isn’t a uniform statement, but many providers do allow you to hold non-UK stocks in a Stocks and Shares ISA. This is great news, as ultimately we want to find the best investing opportunities, wherever in the world it may arise.
Why buy Amazon shares?
One reason I’m keen to add Amazon shares to my ISA is that it acts to diversify my portfolio from just UK stocks. Although it’s a truly global company, the biggest market is by far the US. Last year, almost $194bn of revenue came from the US, with the UK coming in well behind with around $17.5bn. So if the UK struggles to make a meaningful recovery from the pandemic, or manages to have a complicated divorce from the EU, then holding Amazon helps reduce my risk. My UK stocks may underperform, but Amazon shares are likely to be relatively unaffected.
Further, Amazon sits in a great category of being both a defensive stock but also a growth one. This is a rare status. It’s defensive in that it’s not just a retailer but a middleman too via its marketplace offer. The powerful hold it has on the market, along with the barriers to entry, make it hard for it to lose meaningful market share. Due to pretty much any product you could want being on the marketplace, commission-based revenue from sellers will remain firm over this period.
The growth stock side comes through with all of the alternative businesses also under the Amazon umbrella. It’s made advances into high-growth markets, such as online streaming (via Amazon Prime and its own studios). It also owns the streaming service Twitch. So the share price could not only be resilient during tough times, but even show high growth.
A great buy even now?
Amazon shares are up over 50% over the past year, and 100% in just over two years. Looking at traditional P/E ratios or debt-to-equity to assess the future value don’t work that well due to the way the technology sector works. It’s also difficult to compare it to any UK based firm to try and assess a fair price for the shares. Yet I still rate the firm as a good buy because it’s simply a one-of-a-kind business that should continue to grow due to its sheer size, plus the scope for development and innovation the business has.
Jonathan Smith does not own shares in any firm mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.