Scottish Mortgage (SMT ) fund managers James Anderson and Tom Slater have made their first sale of Amazon stock on pure investment grounds, questioning the ability of the US internet giant they have backed for over a decade to maintain its rapid share price growth.
Amazon shares have surged nearly 80% this year as the company has seen demand for its online shopping services soar in the pandemic, pushing its valuation towards $1.7tn.
That startling rise has prompted Jeff Bezos, Amazon’s founder and chief executive, to cash in some of his chips, selling 1m shares and netting £2.3bn on Wednesday, according to a US regulatory filing.
Now it has emerged that Anderson and co-manager Slater have been thinking along the same lines, reducing what was their top long-standing holding of around 10% to 7.9% at the end of September.
‘Whilst we have huge respect for Amazon’s vision and ability to execute, its starting capitalisation of over $1.5tn makes the path to large future returns more challenging,’ the fund managers said in the global investment trust’s half-year results today.
The 20-fold rise in Amazon shares in the past decade has contributed to Scottish Mortgage’s own impressive growth with net asset value growing by 674%, smashing the 191% total return of FTSE All-World index.
Although Anderson and Slater have sold Amazon stock before it has only been on diversification grounds to ensure the successful holding did not get too large and dominate the portfolio.
The Edinburgh-based fund managers have frequently spoken of their admiration for Bezos and the way he has forged a global e-commerce platform and established the leading corporate web services provider AWS.
Over the years as the growth investors have articulated a philosophy of seeking out the few companies like Amazon that can deliver exceptional returns, Anderson and Slater have at times appeared comfortable to pay high valuations on their investments.
That even they are questioning Amazon’s rating, with its shares valued at 97 times its last 12 months’ earnings, is highly significant.
More to follow.
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