I’ve got an investment proposition for you


You give me £112,000 and I’ll give you £30 every 3 months

Ok, I won’t actually give you £30, I’ll give it to you “notionally”

Haha very funny – don’t you think I know how to calculate return on investment?

That’s a paltry 0.1% return. On what planet do you think that would interest me?

But you own Amazon don’t you?

Where the share price is $112 and they earned 3c so I just multiplied everything by 1000 and stuck it in my home currency

Ok but that was only for the quarter

Fine, we’ll go with their annual number where they lost 27c so the revised terms are – you give me £112,000 AND chip in £27

But Amazon is “growing”

Well, I know over the last year they’re grown:

free” cash outflow by $2bn to -$17bn
and net current liabilities by $28bn
and long-term debt by $18bn
and lease liabilities by $5bn
and shares outstanding by 2%
and stock-based awards outstanding by 37%

So yes, they’ve “grown”

But they haven’t grown:

earnings per share or
dividends or
net assets

Stuff that REALLY matters to me (and should matter to every sensible investor)

Yes, but I think they “will grow” when they hit “scale”

So they’re still lacking scale at $514bn of annual sales, are they?

Anyway, I’m happy to increase your return by 50% every year for the next 10 years by which time your £120 of “notional earnings” will have grown to £6920

I know I probably wont give it to you as dividends, mainly because I may need it to offset share option dilution but let’s not get too academic about it

But that’s only a 6% yield?

Yes, in nominal terms…

Ok but AWS is a great business that has annuity income and is also growing

I know everyone THINKS AWS is wonderful and has a growth trajectory

But here’s what the CFO had to say about it on the call

“Hi, Mark. So on the AWS growth rate, I’m not sure I can forecast for you with any level of certainty what is going to happen beyond this quarter. This is a bit uncharted territories economically.”

Sounds like zero visibility to me

Ok but what did the CFO say about net income and free cash flow and earnings per share on the call

He only mentioned “net income of $278m” for the Quarter, said nothing about the $2.7bn full-year loss..

And would it surprise you to know that “free cash flow” wasn’t mentioned?

Not that there was any to mention …

and zip about “earnings per share”

Then again, if you only earned 3c in 3 months off $149bn of sales

would you say anything?


So your fund holds absolutely no positions in any mega-cap tech?

Zero positions

I like to think I also know how to calculate return on investment 😉

Now go watch the video link in my profile if you haven’t already