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What Amazon's Big Tech Device Reveal Means in the Smart-Home Space

By Motley Fool Staff – Sep 26, 2018 at 4:23AM

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You may not think you need an Alexa-connected clock, but the e-commerce giant has plans to insert its virtual assistant wherever you happen to be.

In this segment from Motley Fool Money, host Chris Hill and senior analysts Jason Moser, Matt Argersinger, and Ron Gross dig into the latest from e-commerce powerhouse Amazon (AMZN 0.01%). It quietly dropped more than a dozen new Alexa-related items last week, though the one that really seems to have observers obsessing is the Amazon Basics Microwave. There was also a lot for music fans to like. The guys discuss the various players trying to create smart-home ecosystems, and where Amazon fits into the picture. They also talk about Amazon stock in relation to a question from a listener whose portfolio has gotten a bit out of balance thanks to the company's stellar growth.

A full transcript follows the video.

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This video was recorded on Sept. 21 , 2018.

Chris Hill: It didn't have all the staging and optics of Apple's recent event, but this week, Amazon unveiled more than a dozen new hardware products, including a microwave oven that works with its voice assistant, Alexa. Ron, I'm not even sure where to start with this.

Ron Gross: I want it all. [laughs] I want every single one of them. It's very interesting to me, whether it's the Echo Auto, or the Microwave, as you say, or the Clock. Who doesn't need an Echo Clock?

I think what's happening here, in all seriousness, is that we see Amazon creating an ecosystem. It's what we've time and time again spoken about with respect to Apple, and what's been so interesting for Apple. They want to be in your home, your car, your business, and they want it all interconnected through the Alexa Echo system. I actually think it makes good sense. I think they've got a nice head start on the folks that are competing against them.

Jason Moser: I think it's amazing to think about, five years ago, we really would have all just given Apple the first-place ribbon in this race. Fast forward to now, it seems like Siri can't get out of her own way, and Amazon has just flooded the market with Echo-enabled devices everywhere. It's pretty amazing.

Hill: Also, Matty, we've talked for years about the smart home. You look at Alphabet, their acquisition of Nest. Where is Google and all of this? What do you suppose the reaction was at Google headquarters? Again, this was a very quiet event, in some ways.

Matt Argersinger: Yes. I think it speaks to the fact that Amazon feels like it's a lot closer to home for us because most of us use Amazon regularly. We're not always going out and buying Apple products every month or Google products every month. We're using the services and things like that. But Amazon, we're tangibly buying things for the home. This technology aspect, this platform now that we have for the home from Amazon, feels more like a natural extension, I think.

Gross: 5% away from a trillion dollars, catching up on Apple. I think announcements like this will help them. Stock still has room!

Hill: Well, speaking of the stock, we got a question from Stephen McWray. He writes, "I've developed a good problem in my portfolio. I purchased shares of Amazon several years ago at just under $300 a share. At the time, it represented about 5% of my portfolio. Today, it represents close to 20% of my portfolio. I've heard people talk about trimming a position when this happens and putting the money somewhere else to increase diversification. My problem is, I still believe in my original thesis. I believe the future is still bright for Amazon. What are your thoughts when you find yourself in this position?" Matty?

Argersinger: Stephen, this definitely goes in the bucket of great problems to have. Many investors don't experience this at all in their lifetime, so congratulations on buying a great company and holding it for this long. 20% to me personally seems a little high, if I was looking across all my portfolios. I would say this feels like, to me, an opportunity. If you still love the company... I wouldn't trim it all at once, but consider maybe selling 1% a quarter, get it down to 15%, slowly allocate elsewhere. That might be the way I'd approach it.

Gross: Everyone's risk tolerance is different. Some folks would be OK with 20%. I'm not one of those folks. I wouldn't sleep well at night. No amount of money can beat a good night's sleep, so I would trim it back. It'd be interesting to see if there's tax consequences. I'd love it if it's in a retirement account for him, and he can make this switch tax-free.

Moser: I really can't top the answers these guys gave. Everybody's risk tolerance is unique to their own behavior. Going back to all of the Echo-enabled stuff, I'm trying to figure out exactly what problem does that solve for the most part? I mean, I'm a big fan of the Echo device. We've got a few in our house. But beyond asking Alexa to play music, or a podcast, or give me the weather forecast, or convert something, I'm just not sure that it is going to solve as many problems as perhaps the headlines would have you believe.

Argersinger: But Ron wants everything! He wants it all!

Gross: I want it all!

Moser: Ron wants everything, why?

Gross: It's going to connect my home in many different ways. It's now going to be email-enabled. It's going to be able to handle a lot of your business aspects. It's going to be in video conferencing. In your car, you can have a new app that basically gives you nav, music --

Moser: It's great stuff, but when it doesn't work, it does get pretty frustrating. I'll just use my lights as an example. I have it set up to work and turn on my lights, but every once in a while, it fails, and I'm like, "Ugh, now I have to get up and use the switch on the wall? You're killing me."

Hill: Now you know what to get Ron for his birthday.

Gross: Thank you!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon. Jason Moser owns shares of AAPL. Matthew Argersinger owns shares of GOOG and Amazon. Ron Gross owns shares of GOOG, Amazon, and AAPL. The Motley Fool owns shares of and recommends GOOGL, GOOG, Amazon, and AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.

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