If you want a company good at adapting to shifting trends over decades, consider Amazon.com (Nasdaq: AMZN). Best known for its dominance in e-commerce, it’s expected to account for about 38% of all online sales in the U.S. this year. Wow.
Amazon isn’t finished growing this business, either. Its recent shift toward one-day shipping for Prime members is aimed squarely at keeping its e-commerce rivals at bay. Additionally, its recent Prime Day was a smashing success, with 175 million items sold in just two days. Amazon’s early lead in e-commerce means that as its worldwide market grows to $4.9 trillion by 2021, the company will continue to benefit.
But it’s not just e-commerce that’ll keep Amazon humming. Its lucrative Amazon Web Services, or AWS, cloud computing platform will help, as well. Most of Amazon’s profit already comes from AWS, and as the leading public cloud computing company, with market share recently at 32%, Amazon is positioned to stay ahead of rivals such as Microsoft and Google. Considering that cloud computing is expected to be worth $331 billion by 2022, Amazon is just getting started in this massive market.
If you’re keen to pick a stock and keep it for decades, consider giving Amazon a berth in your portfolio. (The Motley Fool owns shares of and has recommended Amazon.com. John Mackey, Amazon subsidiary Whole Foods Market’s CEO, is on The Motley Fool’s board of directors.)
Ask the Fool
Q: What does “split-adjusted” mean? – R.Y., online
A: A split-adjusted stock price is one that has been modified to account for past stock splits.
Consider the Coca-Cola Co. It went public in 1919 (100 years ago!) at $40 per share and has split its stock 11 times since then. Shares have recently been trading for about $52 apiece, but that doesn’t mean that they have only risen by $12 (30%) over the past century. That’s because the $40 price from 1919 hasn’t been split-adjusted.
When a company executes a regular stock split, shareholders end up with more shares that are worth proportionately less. A 2-for-1 split will leave them with twice as many shares that trade at half the prior price.
Via those 11 splits (which were mostly 2-for-1, but occasionally 3-for-1 or 4-for-1), a single original share of Coca-Cola has become 9,216 shares today. If the company had never split its stock, the value of the shares would never have been reduced – and each share would now be worth around $479,000! Few people could afford to buy even one share.
Most historical stock prices you run across are split-adjusted (if there have been any splits). In a list of historical stock prices, you may see some very low old prices; those have been adjusted retroactively to reflect splits and dividends, so we can see the stock’s real change in value over time.
Q: How many mutual funds are there? – T.F., Kinston, North Carolina
A: There were 8,078 mutual funds in existence at the end of 2018, according to the Investment Company Institute. Consider that there were only about 4,400 companies listed on U.S. stock exchanges in 2018, per the World Bank.
My dumbest investment
My dumbest investment has been wasted time. – A.C., online
The Fool responds: That’s a profound observation. The time we waste can have terrible ramifications in both our personal and financial lives.
There are many examples: If you don’t like your job, for example, you might stay in it far too long before jumping into some training for a better job. If you have a crush on someone, you might end up regretting that it took you several years to ask them out – especially if you end up marrying them. If you put off seeing your doctor about some symptom, it could turn into a much bigger problem.
Procrastination can be very costly when it comes to retirement savings, too. Imagine that at age 45, you start socking away $5,000 each year, earning an average annual return of 8%. By the time you retire at age 65, that account will have grown to about $247,000. But if you’d started saving and investing that $5,000 annually beginning at age 35, you’d have ended up with roughly $612,000 – more than twice as much money!
Meanwhile, any years in which you don’t pay off high-interest-rate debt (such as that from credit cards) will cost you a lot in interest paid. Paying 20% on a $20,000 balance will cost you around $4,000 each year just for interest. Waste less time, and you’ll also waste less money.