As an investor, it’s important to understand who is running the companies in which we invest and to learn how they make decisions.
I’ve probably lost 90% of the readers at this point, but I’ll continue for the remaining reader or 2, but also for myself because I find that by writing this, it helps me analyze and make better decisions. So here we go.
A Lot of Work
The idea of learning about companies and their leaders sounds like a lot of work. And for some companies it is. I wrote in an earlier post about annual reports (here) about how difficult it was to get meaningful information from the shareholder letters written by some of the leaders of the financial companies in which I invest. There is a lot of creative writing and it’s hard to really understand what they’re trying to say.
Contrast that with the reports from companies like Fastenal, Costco, Cummins, or Berkshire Hathaway. In these reports, we get easily consumable information about new products as well as insight into how leadership thinks and makes decisions. It’s a stark contrast.
I’ll be honest, most of my perspective on a company like Visa (Ticker: V) comes from analyst reports. I got interested in the company after reading an article about how Visa makes money on transactions and doesn’t take any risk. The issuing banks and the vendors have all the exposure. Visa just does the processing. It’s a fabulous business model. Read more here. But, I rarely learn anything new by reading their annual report and shareholder letter.
Amazon
This morning Amazon published its annual shareholder letter. When I saw the news, I got a coffee and went to Amazon’s investor page, eager to read. Pretty sad, huh?
Amazon is my largest holding. It is over 7% of my stock portfolio. I try to make sure no company is over 3%, but I make an exception for Amazon. This has given me indigestion a number of times when Amazon has pulled back, but mostly I’ve been pleased.
It’s pretty easy to understand what Amazon does. I’ve shopped on the website. I see their trucks on the road – everywhere. A new warehouse seems to go up weekly in my area. And when I was working in technology and product development, Amazon Web Services (AWS) was a must. It automated so much of the hardware and infrastructure stuff and allowed our teams to focus on building features. And there is Alexa, Advertising and many other ways Amazon makes a buck.
What I Learned – #1 – Why
Amazon has been on top for a while. Walmart and Target are making gains in online and shipping, but Amazon remains the leader. In his shareholder letter, CEO Andy Jassey starts by talking about the Why culture at Amazon.
What I Learned – #2 Decisions
Any of us who have worked in almost any field have probably experienced the frustration of red tape. Getting a decision so that we can move forward often seems much harder than it needs to be . I like that Jassey says:
He goes one step further in the letter where he talks about sending an email to all Amazon employees asking for examples of bureaucracy at Amazon.
What I Learned #3 – Operate Like a Start-Up
Wrap-Up
There is a lot more to read in the letter. More about people and culture and quite a bit of discussion on AI and why it is important for Amazon to invest heavily.
It was an enjoyable read at 7 this morning and I learned quite a bit.
There is information about the company’s growth, but it is more focused on how the company thinks and solves problems.
I also love that they attach (as they do every year) the 1997 shareholder letter from Jeff Bezos. We’ll see many of the same themes.
I’ve written a lot about conviction. It’s easy to be an investor in years like 2023 and 2024 where the S&P 500 is up 20% each year. It is significantly harder in 2025 when tariffs show up and the market plunges. We start questioning and doubting. It’s natural. Our life savings are disappearing before our eyes.
It’s easy to say “I need to sell” so we can save what’s left. I get it. I did this in 2008. It turned out to be a mistake, but I didn’t know this at the time.
What I’ve learned is that it’s much easier to hold on to companies that I know well. After reading the Amazon shareholder letter, I have no doubt that Amazon will succeed, even if the economy suffers a few bad years.
I’m not sure I feel that way about all of the companies in which I invest so that means it is time to dust off my thesis for some of these.