Please ensure Javascript is enabled for purposes of website accessibility

Why Amazon Is a Smart Stock for Your Retirement Portfolio

By Daniel B. Kline - Jan 28, 2020 at 8:50AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company always has its focus on the future.

Amazon (AMZN -2.78%) CEO Jeff Bezos has retained his start-up mentality. He runs one of the most successful retailers in the world, yet he keeps his company focused on the idea that it's had from day one.

That's a philosophy that Bezos regularly references. It's detailed in a letter he wrote in 1997 that he continues to attach to each year's annual report. 

But this is Day 1 for the Internet and, if we execute well, for Amazon.com. Today, online commerce saves customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the very process of discovery. Amazon.com uses the Internet to create real value for its customers and, by doing so,hopes to create an enduring franchise, even in established and large markets.

Even though it's 23 years after Bezos wrote that letter, the underlying ideas still apply. That's at the core of why Amazon may be the perfect long-term investment for your retirement portfolio.

An Amazon drone

Amazon has invested in technology including drones that will eventually pay off. Image source: Amazon.

Building for the future

Many public companies manage for the next quarterly report. Management may worry about spooking shareholders, or even getting fired, if they have a down quarter.

That type of thinking values the present over the future. A company that's being managed to deliver good quarterly results may not be making the investments needed for long-term success.

Amazon has never been run that way. Bezos has the advantage of being his company's founder, not just its CEO. Because he owns a controlling interest in the online retailer, Bezos does not have to make short-term decisions in order to protect his job.

That has allowed him to make bold bets. The most recent example is his decision to move from a two-day shipping standard to one-day. Consumers arguably weren't asking (at least overtly) for that. Bezos understood, however, that it was important to stay ahead of his rivals and give customers better service, even if they weren't demanding it.

Efforts like this tie to a section in the 1997 letter. Under the headline "it's all about the long-term," Bezos laid out the underlying philosophy that continues to guide the company.

"We believe that a fundamental measure of our success will be the shareholder value we create over the longterm," he wrote. "This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital."

It's always day one

Your retirement portfolio does not just need stocks that perform well today. It should also be filled with companies that are investing for long-term success, and Amazon epitomizes that philosophy.

Bezos' 1997 letter explained that the company would "continue to focus relentlessly on our customers." He also pledged to focus on "long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions."

That's what you want as an investor -- a company that's constantly focused on tomorrow. Amazon will have bad quarters, even bad years, but that's not what's important. The company is making the moves needed to keep it ahead of the pack in retail for decades to come.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.22 (-2.78%) $-3.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.