You've probably heard of analysis paralysis. It's what happens when you can't make a decision because you overthink the situation. Analysis paralysis is a common challenge with investing. After all, there are thousands of stocks to pick from.
I've personally experienced analysis paralysis to some extent in the past. But not now.
When I sat down to think about which stock would be my top choice to buy, it didn't take me very long to reach a decision. The one stock I'd buy right now is the same stock I've had at the top of my list for several months -- Amazon (AMZN 2.39%). Here are three key reasons why the e-commerce giant remains my favorite pick.
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1. The trends are its friends
What are some trends that you think will be really important over the next decade? My answers would include the increased adoption of artificial intelligence (AI), cloud computing, digital payments, e-commerce, self-driving cars, and TV streaming. Amazon is already a leader in most of these trends and could emerge as a key player in the others.
Let's tackle the obvious ones first. Amazon remains the 800-pound gorilla in the e-commerce market. The COVID-19 pandemic has cemented its top spot even further. Amazon is still the No. 1 cloud hosting provider despite facing tremendous competition from Alphabet and Microsoft.
The company's Amazon Prime Video ranks as one of the leading streaming TV services. With its Alexa personal assistant and extensive use of AI in other parts of its business, Amazon is without question a major player in this technology.
Granted, Amazon isn't really a leader in digital payments at this point. However, Amazon Pay is accepted on several websites other than Amazon.com. The company also isn't at the forefront of self-driving car technology, but that could change with its acquisition of self-driving car start-up Zoox.
2. It's a money machine
You and I invest with the goal of making money, and Amazon is a money machine.
In the second quarter, Amazon reported sales totaling $88.9 billion. That was a 40% jump from the prior-year period. Its earnings doubled year over year to $5.2 billion.
But what's really impresses me about Amazon is its cash flow. The company generated free cash flow of $31.9 billion in the 12-month period ended June 30, 2020. That figure is up from $25 billion in the 12-month period ended June 30, 2019.
Companies can fudge earnings somewhat by using accounting tricks. Free cash flow, though, provides investors with a really good picture of how strong a business is. Amazon's business is exceptionally strong. The company also continues to put its cash to good use by investing for future growth.
3. Even the negatives aren't that bad
Are there some negatives for Amazon? Sure. But even the company's negatives aren't all that bad.
Take its valuation, for example. Amazon's shares trade at close to 115 times expected earnings. That kind of multiple would cause me to run like the wind from most stocks. However, it's actually on the low end of the historical range for Amazon in recent years.
Another negative for Amazon is that the company could be broken up. The company faces antitrust investigations in the U.S., Canada, and potentially Europe. Maybe Amazon will eventually be split. Even if that happens, though, I'm convinced that the sum of its parts would be worth more than Amazon now.
Finally, the U.S. is in an economic recession. It's possible that the coronavirus pandemic could worsen in the fall. If that happens, many stocks could be hammered. However, Amazon has already shown how resilient it is. Consumers will likely increase online shopping if the coronavirus outbreak intensifies.
Yes, Amazon's share price could fall over the next few months. Even the best stocks can experience challenges when swimming upstream against a stock market correction. But any decline will only be temporary, in my view. Amazon's positives -- and even its negatives -- make this stock No. 1 on my list.
