Investing In Amazon: Top Funds To Consider

Amazon is a global leader in e-commerce and cloud computing, with a market value of nearly $1 trillion. The company has grown from a humble online bookstore to a technology giant, with a presence in various sectors. Amazon's stock has been popular among investors, and the company has split its stock four times since going public in 1997.

There are several funds that invest in Amazon, including mutual funds and exchange-traded funds (ETFs). Amazon is often included in funds focused on the technology sector, recognising the company's role as a leading cloud computing provider through Amazon Web Services (AWS).

- Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX): Amazon's largest mutual fund holder, with over 12.1 million shares worth $41.9 billion as of April 2021.

- Vanguard 500 Index Fund Admiral Shares (VFIAX): Amazon's second-largest mutual fund holder, with 8.8 million shares worth $30.5 billion as of April 2021.

- The SPDR S&P 500 ETF Trust (SPY): Amazon's third-largest fund owner, managed by State Street Global Advisors.

- Fidelity 500 Index Fund (FXAIX): Amazon's fifth-largest mutual fund holder, with $328 billion in assets under management.

- Amazon Catalytic Capital: Amazon's own investment fund, which has committed to investing $150 million in venture capital (VC) funds, accelerators, incubators, and venture studios that support underrepresented founders.

Top 5 mutual funds that hold Amazon stock

Amazon's stock has been popular among both individual investors and mutual funds. Here are the top five mutual funds that hold Amazon stock:

• Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX): Amazon's largest mutual fund holder, with over 12.1 million shares worth $41.9 billion as of April 30, 2021. Amazon represents 3.40% of VTSAX's portfolio. The fund offers broad stock market exposure and has approximately $1.2 trillion in assets under management, with a 0.04% expense ratio and a 10-year annualized return of 14.02% as of April 30, 2021. The minimum investment requirement is $3,000.
• Vanguard 500 Index Fund Admiral Shares (VFIAX): Amazon's second-largest mutual fund holder, with 8.8 million shares worth $30.5 billion as of April 30, 2021. Amazon constitutes 4.20% of VFIAX's portfolio. The fund offers exposure to 500 large US corporations and has $732 billion in assets under management, with a 0.04% expense ratio and a 10-year annualized return of 14.14% as of April 30, 2021. The minimum investment requirement is $3,000.
• SPDR S&P 500 ETF Trust (SPY): An exchange-traded fund (ETF) managed by State Street Global Advisors. As of May 13, 2021, SPY owned nearly 4.4 million shares, representing 3.89% of the total investment. The fund tracks the S&P 500 index passively and had a five-year annualized return of 17.25% as of April 30, 2021. With $358.4 billion in assets under management, SPY has an expense ratio of 0.0945%.
• Invesco's QQQ: An ETF that contains stocks within the Nasdaq-100 Index, including 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market. QQQ owns about 4.2 million shares of Amazon, representing 8.48% of the fund, with a market value of $12.9 million as of March 30, 2021. Invesco's QQQ has $843 million in assets, a 0.20% expense ratio, and a five-year annualized return of 27.20% as of April 30, 2021.
• Fidelity 500 Index Fund (FXAIX): Amazon's fifth-largest mutual fund holder, with $328 billion in assets under management. FXAIX tracks the S&P 500 Index and owns about 4 million shares of Amazon, worth $12.1 billion, as of March 31, 2021. Amazon constitutes 3.90% of the fund. FXAIX has an expense ratio of 0.015% and a five-year annualized return of 14.41% as of April 30, 2021, with no investment minimum.

Amazon's stock split history

Amazon's stock has split four times since the company went public in 1997. The first three stock splits took place in Amazon's first two years as a public company, and the fourth occurred more than 20 years later. Here is a summary of Amazon's stock split history:

• June 2, 1998: a 2-for-1 split
• January 5, 1999: a 3-for-1 split
• September 1, 1999: a 2-for-1 split
• June 3, 2022: a 20-for-1 split

As a result of these stock splits, one Amazon share bought before the first split in June 1998 would equal 240 shares today. Amazon's stock symbol is AMZN, and it is listed on the Nasdaq Global Select Market.

Amazon's competitors

Retail Market Competitors

Amazon's biggest retail competitors include Walmart, Target, Costco, and Best Buy. Walmart is a big-box department store and the largest brick-and-mortar retailer in the world, with over 11,000 stores in 27 countries. In FY 2020, Walmart generated $524 billion in revenues, compared to $404.44 billion for Amazon. Other competitors in this category include:

• Target: One of the largest discount retailers in the world, with 1,868 stores across North America. In 2020, it generated $78 billion in revenue.
• Kroger: The largest supermarket chain in the US, with nearly 2,800 stores in 35 states. In 2020, Kroger's revenue was $41.55 billion.
• Costco: A members-only wholesale retailer with 803 warehouses and e-commerce platforms. In 2020, Costco's revenue was $163.22 billion.
• Best Buy: A multinational consumer electronics retailer with 1,779 stores in North America. In 2020, Best Buy saw a huge surge in domestic online sales, with a 242% increase to $5 billion.
• Home Depot: Offers home improvement products at reasonable prices through 2,291 stores. In the first half of 2020, Home Depot's online sales jumped by 90%.

Subscription Services Competitors

Amazon's main competitors in the subscription services sector are Netflix, Apple, and Google. Amazon Prime is Amazon's most popular subscription service, with 200 million members worldwide as of 2020. Netflix, Amazon's biggest competitor in this sector, has 220 million+ subscribers and offers original content, released at an average rate of over one title per day.

Web Services Competitors

Amazon Web Services (AWS) is Amazon's cloud platform, and its main competitors in this sector include Alibaba Group, Oracle, Microsoft, IBM, and Google. AWS offers over 200 services, such as machine learning, artificial intelligence, storage, and analytics. Microsoft Azure, AWS's biggest competitor, is the second most popular cloud service, with 17.6% of the market. Google Cloud Platform is the third most popular, with 6% of the market.

Amazon's recent developments

Amazon has been making headlines with several recent developments, including:

Union Votes and Labour Relations

In April 2022, workers at Amazon's JFK8 warehouse in Staten Island, New York, voted for union representation by the recently formed Amazon Labour Union. This was a landmark victory, as it was the first successful unionization effort at an Amazon facility. Since then, there have been ongoing legal battles, with Amazon filing motions to invalidate the election results and workers at another Staten Island warehouse voting against unionization.

Product Recall

In July 2021, the U.S. Consumer Product Safety Commission (CPSC) sued Amazon to force a recall of hazardous products sold on its marketplace by independent merchants. These products included faulty carbon monoxide detectors, hair dryers without proper immersion protection, and children's sleepwear that did not meet flammability standards. While Amazon took some action, the CPSC argued that they did not comply with all the required distributor rules. In January 2022, an administrative law judge ruled that Amazon must comply with these rules.

Antitrust Lawsuits

Amazon has been facing antitrust lawsuits, including one filed by the attorney general for the District of Columbia, which was dismissed by a U.S. Superior Court judge in March 2022. The lawsuit alleged that Amazon's agreements with third-party merchants, which obligate them to price their products on Amazon no higher than elsewhere, serve to increase consumer prices. The attorney general has since sought reconsideration of the ruling. Additionally, a class action suit against Amazon over the same pricing rules is ongoing in Washington state.

Acquisition of MGM

In March 2022, Amazon announced the completion of its acquisition of MGM for $8.45 billion. This deal gives Amazon access to MGM's catalog of over 4,000 films and 17,000 TV shows, significantly bolstering its video-streaming offerings. The acquisition was closely scrutinized by the Federal Trade Commission (FTC) but was not blocked due to a split among the commissioners.

Layoffs

In November 2022, news leaked that Amazon was planning to lay off 10,000 employees, or 3% of its corporate workforce. The company confirmed this shortly after. However, in January 2023, Amazon announced it would be laying off 18,000 employees, a significantly higher number than initially expected.

Amazon's investment in the US

Amazon has invested heavily in the US economy since its founding in 1994. The company has contributed an estimated $1.2 trillion to the US GDP since 2010 and invested $244 billion in the US in 2023 alone. Amazon's investments have supported 4.8 million jobs in the US, including 1 million full- and part-time jobs directly created by the company. In addition to its direct investments and job creation, Amazon has also contributed to economic growth through its tax contributions, which totalled $41.3 billion in 2023.

Amazon's investments in the US are spread across various states, with particularly large investments in California ($179 billion since 2010), Texas ($70 billion since 2010), Virginia ($135 billion since 2010), and Washington ($277 billion since 2010). These investments have included infrastructure development, such as fulfillment centres, sortation centres, and Whole Foods Market locations, as well as compensation to employees.

In addition to its economic impact, Amazon has also invested in communities across the US. The company has partnered with over 1,500 nonprofits to address challenges such as affordable housing, hunger, and access to tech education. Amazon's programs like Career Choice offer employees opportunities to upskill and advance their careers, with pre-paid college tuition and skills training programs.

Amazon's investments in the US have not only contributed to economic growth but also positively impacted communities and created opportunities for Americans across the country.

Frequently asked questions