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Strategies & Market Trends : Value Investing
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To: Michael Burry who wrote (11027)7/30/2000 2:04:19 AM
From: James Clarke  Read Replies (3) of 78517
 
This is not the reason I bought Amazon, but just ask yourself if there is a stock being beaten up more in the financial media than Amazon. Every contrarian investment is not a value investment, but its a start.

I'm not going to go in depth on Amazon here, but think about this. Amazon has about 4 million square feet of real estate, and this is warehouse real estate. How many dollars of sales can a retailer generate from 4 million square feet of real estate? At $300 a foot, about $1.2 billion. Amazon will probably do something like $3 billion this year. And the real estate they have in place can handle three times that.

Second point is that if Walmart wants to stock an item they have to stock it in every store. Amazon should be able to turn over its inventories much much faster.

Think about these two points. This is a wonderful economic model. Hasn't shown in the financials yet, but it is starting to.

If you haven't read Quest for Value yet, you must. Amazon is a Z. For a Z you look forward, not backward. And a Z you value like an option. Value investing formulas do not apply to a Z. Bill Miller wrote an article in Barrons about a year ago about Amazon which argued that an option can be a value investment. I ridiculed his article at the time. Now I understand what he was saying.
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