Q: I have held Magna for multiple years, and with the execption of a surge in value three years ago (which it eventually surrendered), it is at pretty much my original purchase price. I have been considering a switch to Amazon, as I cannot think of a more dominant player in the consumer cyclical space. I had also considered starting a position in Aritzia, but I am not as confident in its profile as I am with Amazon. The position of this investment is 4% of portfolio, if the exposure level has any influence at all on the analysis. One potential tailwind for Magna could be manufacture of parts for battery electric vehicles, which should increase in demand over the next five years: my understanding is that MG provides many such parts to multiple companies that make these particular automobiles.
Would a switch from MG to AMZN be prudent, or is there a stronger case to be made for staying put? As always, thanks so much for your insights, and I look forward to your response.
Would a switch from MG to AMZN be prudent, or is there a stronger case to be made for staying put? As always, thanks so much for your insights, and I look forward to your response.
5i Research Answer:
Certainly if we had the choice of only one, we would side with AMZN over MG, though we do think MG has long term good potential. In addition to its dominance in several areas, AMZN's new focus on costs will likely see it have a big surge in free cash flow over the next few years.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in AMZN.