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Portfolio Strategy: Groceries at Amazon.com? How to Lose Money

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amazon-freshWouldn’t your life be easier if the kitchen cabinets and the fridge magically replenished themselves? That’s the thrust behind Amazon’s move into grocery home delivery. Take it from me, the financing runway will have to be pretty long for Amazon to be successful in this business. Grocery home delivery is where I cut my teeth in the investment world.

I remember learning that difficult lesson about Internet investing after spending the summer of my junior year at Babson as an intern for a grocery home delivery startup company. When the job was done, I liked the idea so much that I invested my own money in the company. A few years later I was sitting in Dick Young’s home in Newport telling him about the investment I had made. He thought it was great what the founder of the company was doing and if anyone could do it, this guy could. But I also remember that Dick wasn’t real excited about the business. His feeling was that good ideas aren’t necessarily good businesses/investments-a lesson I ended up learning the hard way. The company unfortunately went the way of Pets.com, Webvan, and Living.com.

It’s possible that Amazon’s CEO, Jeff Bezos, has a long enough runway to make home grocery delivery as easy as his Amazon Prime service. But at what cost? It’s important, especially as an investor, to understand the relationship between good ideas, good businesses, and good investments. Now that Amazon’s management owns this idea/business and the company isn’t simply invested in it, will they have the ability to separate themselves if it turns out that the gold rush in grocery delivery is simply that—a gold rush to nowhere? It could be tough for Bezos & Co. to throw in the towel.

There’s a lot to learn from watching Mr. Bezos. If you have the time, listen to the entire interview below and share it with your children or grandchildren. We’re back on the ground floor of something. Is it something special? I’m not quite sure yet. And if you are short on time, which Bezos knows you are, then listen for a few minutes beginning at 13:00 about where we’ve been, and the road ahead for Amazon.

Ideas From Jeff Bezos – Qualities That Led To Amazon’s Success

 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.

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