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Listener Question: What If Amazon Invested in Blockchain?

By Chris Hill - Jan 23, 2018 at 9:20AM

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The market has been responding fast and hard to crypto developments -- but would that hold for a company as huge as Amazon?

There's a blockchain frenzy going on, and we've seen multiple companies explode in market cap after announcing their interest in blockchain tech. But those companies were mostly small fish -- what would happen to's (AMZN 3.66%) stock if the e-commerce giant announced it was going to dip a toe into the crypto waters?

In today's episode of Market Foolery, Chris Hill and Bill Mann answer that question. Also: why Atlanta might be top of the list for Amazon's headquarters contenders list, some things to keep in mind when you want to buy into a great company that's trading at an all-time high, the merits of high-salt Pringles, and more.

A full transcript follows the video.

This video was recorded on Jan. 19, 2018.

Chris Hill: It's Friday, Jan. 19. Welcome to Market Foolery! I'm Chris Hill. Joining me in studio today, the director of small-cap strategy here at The Motley Fool, Bill Mann. Thanks for being here!

Bill Mann: Hey, Chris! I'm glad to be here!

Hill: Long-time listeners maybe thinking, "Hey, it's Friday. Why is there an episode of Market Foolery? We thought we were done with you until Monday." Long story short, you get a little bonus this week, just because I meant to tape one for last Monday for the holiday. I didn't get to that, and in my head, I thought, we're still going to do four episodes. So anyway, we're going to dip into the Fool mailbag, we're going to talk stock valuations, bitcoin, but first, this was touched on in yesterday's episode of Market Foolery, Amazon narrowing down its list, now its short list, although --

Mann: That's not that short.

Hill: Twenty cities-slash-regions, that's not a particularly short list. I get that they were starting with hundreds. Anyway, I wanted you to weigh in on this, because a couple of weeks ago, you and I were in the studio taping something else and this topic came up. And my memory of your response was, you were --

Mann: All about Atlanta.

Hill: You were all about Atlanta. And it wasn't just that you were all about Atlanta; you seemed like you had specific reasons why you think Amazon is going to pick Atlanta.

Mann: They've gone through the list of things that they want, and Atlanta happens to be the metropolitan area that's big enough that has land that is cheap enough that they're going to be able to do whatever they want. Oh, and by the way, they have a pretty big airport there. So from a transportation perspective -- I kind of don't want it to be Atlanta. I don't want to be right about that, but I think I'm going to be.

Hill: Because you're a shareholder.

Mann: No.

Hill: Oh, you're not a shareholder?

Mann: Of Atlanta? No.

Hill: [laughs] You're an Amazon shareholder, aren't you?

Mann: Indirectly.

Hill: Indirectly, OK. I look at this, and as an Amazon shareholder, I think, I want them to make the right choice; I want them to, if at all possible, get a deal. As a resident of the Commonwealth of Virginia, I'm hoping that my state doesn't back up a Brink's truck of money --

Mann: I agree.

Hill: -- and says, "We'll do anything to get you here."

Mann: I agree. The packages that are being offered, some of which are just rumored, it's really just beggar thy neighbor, the amount of money that's being handed to Amazon. And of course it benefits Amazon, but it's literally just pitting one municipality up against another. And interestingly enough in this area, I believe I have this right -- Washington, D.C., was on the list, but also Northern Virginia as a separate entity was on the list.

Hill: And Montgomery County, Md.

Mann: And Montgomery County. So we have a 3-in-20 chance. What's that, 15%?

Hill: I think that's right, yeah. We're good at math here on this show.

Mann: Good thing we don't need math in our normal jobs, right? [laughs] 

Hill: Exactly. Our email address is From Fred Coble in Normal, Ill. Fred writes, "I see great companies that I'm interested in investing in. And some of these great companies' stocks are hitting all-time highs. I'm more of a value investor, and I struggle buying a stock at its high. Can you at the brain trust in the studio, when does it make sense to buy a stock at its all-time high?"

Mann: When does the brain trust arrive?

Hill: We couldn't get them in.

Mann: But we got me.

Hill: But we got you. And I think this is appropriate for you, because you're a value investor, among other things. Haven't we all been in this position? If you've been investing for any amount of time, if you've been investing in stocks for any amount of time, haven't we all been in this exact position that Fred is in? Where it's like, "Boy, I like that company, [groans]." It's a tough emotional barrier to get through.

Mann: Yes. I feel this question on a molecular level, because it's really easy to look back and say, gosh, six months ago I could have bought this company at two-thirds the price. And is it going to go back? And the answer is, most likely, most stocks do fluctuate. Amazon, which we've just talked about, has spent 96% of its time below its all-time high, and yet that stock is up 100-fold in the past 15 years. So, ultimately, the company that you pick, if you're a long-term investor, is much more important than the price that you buy it at. If you're really psychologically opposed, don't buy it all at once. This isn't the last time you're ever going to be investing, so don't put it all in at once. You'll feel better about it. If you got the company right, most likely that will still be a slightly expensive decision for you.

Hill: From Steven McRae, longtime listener Steven McRae, "Given the recent frenzy around blockchain and bitcoin, where stock values shoot through the roof at the mere mention of blockchain, what do you think would happen to their stock if Amazon announced they were getting into blockchain? Wild, in-depth speculation is encouraged. I have a long run coming up, and this will help pass the miles." [laughs] I love it!

Mann: I don't know how many miles we're going to get into in this particular conversation, but in the recent drop of the cryptocurrencies, it evaporated $400 billion in notional market value. Amazon by itself is valued at $635 billion, give or take. It could move 1% and that's $6 billion. If you check and I'm wrong, maybe in between time, they've said something about blockchain. I don't think it would actually do that much. I actually have two things to say -- one, I guarantee you that Amazon is very interested in blockchain as some sort of way of furthering other parts of their business. At some point, they may come out in and announce it. I don't think it's going to be a big splashy thing. I don't really think it's going to be that impactful for Amazon. The things that it's been impactful for are things where not much was going on, there's not that much float, and suddenly they say, "Hey, we're a blockchain -- we're no longer a naughty iced-tea company, we're a blockchain company." Amazon isn't a naughty iced-tea company to start with, so it's really not going to be as big of a reaction. It can't be.

Hill: There are a couple of things that I like about this question. One is, it gets to something that I don't think has been talked about all that much, which is, we have heard a lot from prominent companies and prominent CEOs, and Jamie Dimon at JPMorgan leaps to mind, who are on the bear side of bitcoin and talking it down. So I like Steven's thinking in this -- what if an innovative, highly successful, one of the biggest market-cap companies out there, then what happens? Along those same lines, I agree with you that this wouldn't have any meaningful effect, necessarily, on Amazon's stocks. However, if something like this happens, it could provide a halo effect for these other companies, which in my mind makes it all the more important that investors really understand the business that they're investing in. Don't you think, if Bezos came out -- well, he wouldn't come out himself --

Mann: He'd have a guy. [laughs] 

Hill: Yeah, he would have a guy or a gal come out and say, "Yeah, we're looking at this." Wouldn't that provide a boost? Or Microsoft or Alphabet or whoever.

Mann: Well, here's the thing. I think, even if you look at the 1,112 cryptocurrencies that exist at this point and say a lot of that is goofy -- and I completely agree -- blockchain itself is credible. And I don't know that there are many people out there -- even people who are saying that cryptocurrencies are berserk -- are questioning the power of blockchaining. So, yeah, Jamie Dimon came out last week -- no, excuse me, not last week, it was last month, maybe, and said this was all a giant fad --

Hill: Let's be honest -- it was a couple of times in 2017 that Jamie Dimon was very clear what his opinions on this was.

Mann: Yeah. But he wasn't really talking about blockchain. I think it's really interesting, the fact that they launched futures on bitcoin, and almost immediately we had this massive drop. If you want to make a conspiracy around that, the Wall Street Elf on a Shelf got busy. [laughs] 

Hill: Speaking of bitcoin, you posted something on Twitter -- you had sent this to me on Slack and our friend Bill Barker, and at least one listener picked up on this, as, he said, I think we've found our bitcoin.

Mann: We have!

Hill: Would you like to share it with the audience?

Mann: It's called CoffeeCoin!

Hill: CoffeeCoin! Sure! Who wouldn't want to invest in and be a part owner of this particular currency?

Mann: It's a token that's to be used specifically in the specialty coffee industry, so that you can track, you can track lots, you can track different seeds for coffee plants. It's a really good idea, except for the fact that it's almost 100% doomed to failure. Because it's too specific. We saw this with the dot-coms back in the day. There was and This is the of the cryptocurrency world. But the flip side is that the entire market cap of its float is a little over $4,000, so it doesn't take much for us to absolutely corner the CoffeeCoin market. I'm in!

Hill: I would feel better about this if I felt like I could take my CoffeeCoin and go to Dunkin' Donuts and use it. But I'm pretty sure they're not accepting it.

Mann: They may not know how to give change for CoffeeCoin.

Hill: Another thing you sent to me on Slack -- and really, this is as good a way as any to wrap up the week --

Mann: This is what you really wanted to talk about, let's be honest.

Hill: Yes. For those unfamiliar with this website, is, I think, a pretty great website for having fun arguments and wasting a little bit of time in a fun way.

Mann: They do listicles better than almost anyone else. They seem to have put some thought into their lists.

Hill: Here's another thing that they do that I noticed when I was on their site today -- and I think this is helpful for anyone who --

Mann: Anyone. Move on.

Hill: Anyone who's a Netflix subscriber and finds that it's increasingly difficult to figure out what to watch. Carl Quintanilla talked about this recently when he was on Motley Fool Money; they have a little bit of a curation challenge on their hands. So one of the things Thrillist does every month is, one of their lists is, "Here are 100 new movies to Netflix, and these are the 100 best ones."

Mann: Which is three a day, which is aggressive.

Hill: Yeah. I went through the list. Not going to make it through all of them.

Mann: [laughs] That's right.

Hill: But, Godfather I and Godfather II, new to Netflix.

Mann: And not III.

Hill: Not III. A little bit of a slap at III.

Mann: A little. It's been slapped a lot. I mean, I get it.

Hill: I have a soft spot for that movie, but I get the criticism. The list that you sent me, far less relevant than movies on Netflix, an article entitled "We Ate and Ranked All 26 Pringles Flavors." I just want to say, in terms of Market Foolery history, Pringles and Tang -- Pringles flavors and Tang flavors -- those precede what we've talked about in the last year or two with Oreos and that sort of thing. And you've always been very kind in your travels over the years, when you come across an international airport and see some unusual Pringles, you're always nice about bringing them to me. But my reaction to this list -- I think you and I had the same reaction, which was, they were very clear to stay up front, all of these flavors are available in the United States of America, all 26. And I went through the list, and on at least a third of them, I thought, I've never seen that before.

Mann: Never!

Hill: And by the way, I look.

Mann: That's right. It's kind of my thing.

Hill: I totally missed the Loud, the Pringles Loud, which I guess, they doubled up on the flavors?

Mann: Yeah, and a thicker chip. The thing that I didn't love was, they added the corn chips.

Hill: Yeah, I don't like that at all.

Mann: No. Pringles are a thing.

Hill: Were you a little surprised that the Original flavored Pringles was not No. 1 on the list?

Mann: No, actually, I kind of saw that coming. The way that they do it is, they're counting down. There were some that were somewhat lower than I would have thought. The jalapeno ones I think are a lot better than absolute dead last. But yeah. It was not the best. It was not ranked the highest.

Hill: It got the silver medal. And No. 1, spoiler alert, cheddar cheese.

Mann: Cheddar cheese. Do you know what they also have? I don't know if you've seen this. But, over the holiday --

Hill: By the way, if people haven't already figured it out, we're totally done with the investing talk. So let's move on.

Mann: [laughs] That's right, we've provided all of the value we're going to provide today.

Hill: Yeah, it's just nonsense from here on out.

Mann: They have, over the holidays, salted-caramel flavored Pringles. If you take the cheddar Pringle and the salted-caramel Pringle and you eat them simultaneously, that's glorious.

Hill: That's a mash-up. I like that. Here's one other thing in the list. And we'll tweet this out on the Market Foolery feed. I found this odd. Because to me, if you're eating Pringles, and I do, health is the last thing on your mind.

Mann: [laughs] That's right. I am shocked.

Hill: That's not why I'm eating these, so I can be healthy. That's why I found it curious that, ranked much higher than I would have expected, was several different versions of lightly salted. I'm there for the salt, people!

Mann: Yeah! And some of the ones that were ranked lower were ones that they thought were too salty.

Hill: Again, you just can't go wrong with the original. We're all for the experimentation, and it's not like they're going crazy.

Mann: We're not purists.

Hill: We're not purists, and we're not saying that the Pringles people have gone insane with power like the Mondelez goons running the Oreo division.

Mann: With the Oreo flavored Oreos? Which is essentially what cookies and cream Oreos are?

Hill: Yeah. They're drunk with power over there. Again, if you're a Mondelez shareholder, don't blame me if their costs are too high. Bill Mann, thanks so much for being here!

Mann: So great to see you, Chris!

Hill: As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of Market Foolery. Taylor Harris helping us out behind the glass this week. I'm Chris Hill. Thanks for listening! We'll see you on Monday!

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