As for my last pick, there is no easier way to make money in the market than to buy a great company under pressure due to short-term concerns.There are plenty these days.

Amazon.com has dramatically lagged other big tech stocks and the market in the past year. Its core retail business is facing difficult comparisons postpandemic. First-quarter revenue and profit expectations may be too high, and comps won’t get easier until the third quarter. Also, retail margins have disappointed. Amazon’s retail business is trading in line with Walmart [WMT] on an enterprise value to sales basis, based on 2023 numbers. If you were to separate out the high-multiple and high-growth advertising business, you could argue that you were paying negative value for the retail segment. The margin disappointment relates to the magnitude of square-footage additions in the past two years. When expansion slows, margins will expand again.

The market is so fixated on retail that it has missed the value of Amazon Web Services, or AWS, which is conservatively worth 12 times sales, or $1.15 trillion, based on 2023 estimates. We expect this business to grow revenue by $14 billion to $15 billion in 2021, a 30% increase. Given 10% to 15% of TAM [total addressable market] penetration by AWS and cloud-computing companies, there is a long runway for growth. We think Amazon’s stock could double in four years, assuming a multiple of 10 times sales for AWS and 35 times normalized earnings for the retail and advertising business, based on 2027 estimates.