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Author: DCWD40 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 2549  
Subject: Re: Risint Star Buy: AMZN Date: 1/10/2012 3:47 PM
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I owned Google in the Fall of 2009 and sold it in early 2010. What spooked me were low margins, tax threats, and lousy PEG.

It is interesting that the PEG was not mentioned in the article. It is 5.87-times. That's very high.

http://finance.yahoo.com/q/ks?s=AMZN+Key+Statistics

One reason Amazon gets a pass is because people say it is quickly building its earnings will come later. I remember when Amazon borrowed $2 billion years ago, instead of selling high-PE shares, and thought they were nuts. It turns out it was a good move because they didn't inflate the shares outstanding and they paid back the debt.

Amazon's operating margin is 2.47%. That's low. But, in the Catalogue and Mail Order industry, the average is 0.73%. But, before you jump for joy, companies like eBay, in the same industry, have margins of 20.54%.

http://finance.yahoo.com/q/co?s=AMZN+Competitors

At the time I owned the stock, Congress was toying with allowing states to charge sales tax on goods sold on the Internet. I think this issue will come up after the election when Congress finally get serious about cutting deficit spending. [Did I really just write that anything would happen after the election? lol]

I asked my wife to watch her Amazon purchases this Christmas and let me know if she would make those buys if they cost her 8.5% more (the Florida sales tax rate). In most (but not all) cases she said that adding sales tax would have made Amazon more expensive and she might of not used them.

The risk in this stock could be great. While it can grow like a weed because it doesn't require the brick and mortar of a Wal-Mart, its tax advantage is one factor in its success. Congress wanted to give the Internet a chance when they set tax policy like they did. Times have changed.

I think Amazon has a poor lobbying position when Wal-Mart has a net debt of $52 billion but pays local wages and property taxes plus contributes to local charities -- and does this on a meager 5.94% operating margin. Imagine Wal-Mart, vilified on multiple fronts, becoming the sympathetic focus of the man and woman on Main Street because they have to fight a competitor that is putting no dollars in their local community or state. And, with its

As you said Alyce, this is a controversial pick. And, I am not certain how socially responsible (SR) Amazon is. Yes they have programs to do the right thing but they could be cost savers; not SR responses. It can't function well at the local level of every state. It has to take a broad society-at-large stance. I found this from the company:

The company is committed to the growth of healthy enterprise that respects both local culture and the environment, thereby creating a more just society for all. Sustainable Amazon seeks partners, venues, private label opportunities and distribution channels in the United States to showcase and sell their products.

http://www.csrwire.com/members/9381-Sustainable-Amazon

It is hard to find critical SR comments because a Google search on the subject brings up gobs of books. But, there was this:

A couple of weeks ago, just before Earth Day, Amazon presented some interesting information about the green purchasing habits of its customers, showing how America is going green. One interesting piece that was missing in this report was how Amazon is going green.

Frankly, I really don’t know how green is Amazon because when it comes to its own footprint, Amazon is consistently more secretive than the CIA (which actually doesn’t mind sharing its green initiatives).

It is well known for example that Amazon does not reveal information on how many Kindles it sells, but did you know Amazon also does not share information about the carbon footprint of the Kindle? Although it is their top selling product ever, Amazon has repeatedly ignored requests to provide information regarding the Kindle’s footprint. Here are two examples:
1.Joe Hutsko of the New York Times tried to learn more about the Kindle and reported that “phone calls and e-mail messages to Amazon inquiring about the materials in the popular Kindle device have thus far gone unanswered.”
2. Emma Ritch of Cleantech Group, who wrote the report “The Environmental Impact of Amazon’s Kindle”, wrote that “Amazon declined to provide information about its manufacturing process or carbon footprint.”

And it doesn’t stop with the Kindle. Amazon, unlike 70% of the S&P 500 companies, does not respond to the Carbon Disclosure Project (CDP) questionnaire, asking corporations to disclose their greenhouse gas emissions and climate-related risks.

Another example can be found in the 2009 Green Grades Report Card published by Dogwood Alliance and ForestEthics, where Amazon got an F. It was reported there that “the giant online retailer ignored our survey, so questions remain about their paper sourcing practices.” In the 2010 report Amazon got F+, but it wasn’t reported if it finally provided the requested information or kept ingoing the requests for doing so.


http://www.triplepundit.com/2011/05/amazon-carbon-footprint/...

Fortune may admire Amazon but they appear to me to have big SR problems. Lousy PEG. Low operating margins. Amazon isn't greener for me because I grocery shop and buy odds-and-ends at Wal-Mart, Publix, and CVS in the same trip. Those stores are right in a row and I am not trusting Amazon to deliver milk and other perishables -- so going to the store is not an I-can-skip-it option.

I am not considering Amazon at all.

W.D.
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