NEW YORK (Reuters) – For most U.S. fund managers, beating the market this year has come down to one decision: whether or not to own shares of Amazon.com Inc More than 70 percent of the actively-managed U.S. large-cap funds that are beating the 3.5-percent gain in the benchmark S&P 500 own shares of the Seattle-based e-commerce giant, according to Lipper data. Shares of the company are up nearly 45 percent for the year-to-date, and account for nearly 40 percent of the S&P 500’s gain for the year, according to S&P Global. Those gains have left even investors like Warren Buffett, who has never invested in Amazon, kicking themselves for missing out on the company’s growth. “I was too dumb to realize what was going to happen,” Buffett said at Berkshire Hathaway Inc’s (BRKa.N) annual shareholder meeting in early May. Amazon has benefited this year from continued growth of e-commerce and is a business that seems largely immune from the threat of a global trade wars. Yet with volatility in the stock market expected to continue through the U.S. midterm elections in the fall, Amazon’s pricy valuation and high level of fund ownership may leave the stock more vulnerable to a steep decline, analysts warn.As a result, some outperforming fund managers who have so far avoided Amazon are branching out into companies ranging from Asian e-commerce company Alibaba Group Holdings Ltd to medical device maker Abiomed Inc all in an effort to find better values.
Doll has avoided Amazon because of its trailing price-to-earnings ratio of 267, a valuation more than ten times that of the broad S&P 500. Shares of Alibaba are up 21 percent for the year and trade at a trailing price to earnings ratio of 54.3.
Fund manager concentration in Amazon may leave the company more vulnerable to sell off if the volatility in the broad market increases this fall ahead of the mid-term elections, said Todd Rosenbluth, director of mutual fund research at CFRA Research. “We’re of the belief that there will be greater market volatility for the duration of 2018 and while in theory that gives active managers a chance to buy in on whatever they have missed out on, that volatility could hit the better performers first,” he said. “The average U.S. company is not growing that much. Earnings may be up a lot but a big slug of that is from the benefits of the Trump tax cut,” he said. “The only way to outperform is to find companies that are creating their own theme.” Nick Bit: These valuations are crazy shit. We are headed for another TECH WRECK and we are loaded for bear. Its not just Amazon either.