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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (5701)	1/11/1999 6:02:00 PM
From: Andrew Williams	Respond to of 78741

RE: Buffet and AMZN Buffet once told a story, in response to "Tell us about a big mistake." When he was still very green(hard to believe), he had six thousand dollars to invest. He split it evenly between three investments. One third of his money went to a friend who had a gas station at a very good location. The business failed and he lost $2,000. At the time he was telling the story, Buffet's net worth was around $30 bil. His next comment was that the mistake cost him $15 bil. He is a big believer in compounding. A colleague of mine knows AMZN better than me. He explained that they buy a book, sell it within 15 days on ave, and pay for it within 30 days on average. So they have 15 days of float which they can use to finance the business. A traditional bookseller sells the book after 100 days but pays for it after 30 days. So they have to finance inventory. My response was: AMZN pays shipping charges. This has to eat a lot of the margin. That is why SG&A is so high. It seems to me average order size would be more important than lots of small transactions each with a shipping charge. So it is not just a matter of building sales of any kind, but reducing shipping charges per order. Do we know what we are talking about? In any case, AMZN will have to show a trend towards profitability someday. Looking at the financial statements alone, I would value the business in the single digits. Maybe the "AMAZON" franchise is worth something even without earnings. I don't believe it. They will probably do a secondary. Look for another chance to short it. Andrew