- There are three main ways to profit from Amazon's rapid growth and increasing dominance of the retail sector, according to Brian Belski of BMO Capital Markets.
- Many of the best opportunities are in companies and industries peripherally related to Amazon, while others can be found in areas insulated from its influence.
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The 3 best ways to trade Amazon's retail dominance (AMZN)
There are three ways to trade the Amazon-led retail apocalypse, according to Brian Belski of BMO Capital Markets.
What's the best way to trade the rapid ascendance of Amazon into a global juggernaut?
The answer is not as simple as it may seem. After all, anyone with even a passing interest in business and markets knows that Amazon is muscling into new areas and expanding its reach on a daily basis. Entire portfolios have been kept afloat by the company's stock, which is up 50% this year.
With that in mind, the question is perhaps most accurately posed as: What's the best way to invest in a company that's viewed by nearly everyone as completely unstoppable?
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Brian Belski, the chief investment officer of BMO Capital Markets, sees three main avenues:
1. Buy the stock outright — but with a catch
On the surface, this recommendation couldn't be more obvious. Buy Amazon's stock, and ride it higher. Simple as that.
But Belski says it's not that simple, and that's because of how expensive Amazon shares are right now. Sure, you can pay an arm and a leg for Amazon shares, but even if it churns out healthy gains, you're still paying a lot to enter the trade in the first place.
Belski points out that Amazon's price-to-earnings ratio — the most commonly used stock valuation metric — has been above 100 for most of the past five years, on a forward 12-month basis. "At some point the party will be over," says Belski, who says that the stock will eventually adjust lower to more closely match earnings.
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Applying that outlook, he recommends paring Amazon holdings on big stock spikes, and only adding to positions on "sharp price dislocations."
2. Buy stock in companies involved in Amazons logistics
Belski's next suggestion is one step removed: betting on stocks that make up one small piece of Amazon's massive ecosystem.
That's right — while Amazon has repeatedly shown itself capable of creating or erasing
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