Amazon Recovers From Trump Tweets By Ignoring Them And Delivering Good Results


&l;p&g;&l;img class=&q;dam-image bloomberg size-large wp-image-41143614&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/41143614/960×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Jeff Bezos, founder and chief executive officer of Amazon.com Inc. Photographer: David Paul Morris/Bloomberg

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When Amazon was trading at $700 in May of 2016, &l;a href=&q;https://rexjacobsen.mytrackrecord.com/RMF&q; target=&q;_blank&q;&g;Rex Jacobsen&l;/a&g; told us&l;span&g;&a;nbsp;&q;&l;/span&g;&l;a href=&q;https://www.forbes.com/sites/kenkam/2016/05/27/the-market-is-underestimating-amazon/#5dd2c1823939&q; target=&q;_self&q;&g;The Market Is Underestimating Amazon&l;/a&g;&q;&a;nbsp;and set a target price of $1,100. Last month, Amazon traded as high as $1,598 until President Trump&s;s tweets knocked it back about 14% to $1,372. Since Amazon announced record earnings last week, the stock hit a new high of $1,634, and Wall Street firms have raised&a;nbsp;their target prices to as much as $1,900. Trump&s;s tweets are a&a;nbsp;good example of how news can be blown out of proportion to create great entry points.&l;/p&g;


The president&s;s tweets complained that the U.S. Post Office is losing money on Amazon&s;s business.&a;nbsp;The last time I checked, however, Amazon&a;nbsp;does not have the power to force the Post Office to do anything. If Amazon and the Post Office came to an agreement voluntarily, I presume they both gained from it.&a;nbsp;Since&a;nbsp;only the government can&a;nbsp;force the Post Office to do anything, I cannot see how&a;nbsp;Amazon can be at fault here.&a;nbsp;If the Post Office is losing money, it is their responsibility to do something about it, not Amazon&s;s.


Whether you think the president has a valid point, or not, his tweets&a;nbsp;convinced&a;nbsp;so many people to sell that the stock dropped 14%. Investors who bought during this episode saw the stock recover before April was over, and are now seeing Wall Street firms one-upping each other&a;nbsp; to set a higher target price.

&l;strong&g;Lessons Learned&l;/strong&g;

President Trump&s;s tweets can have a big impact on a company&s;s stock. However, in order for the impact to last longer than a few news cycles, the&a;nbsp;tweets&a;nbsp;need to be followed with action.


Amazon recovered quickly because the company reported a great quarter, and because the president&s;s attention turned elsewhere.

In today&s;s market, it is more likely that we will go back and forth over the same 1,000 points than go up 1,000 points from here. Many stocks&a;nbsp;that lost 9% or more&a;nbsp;from recent highs have since recovered. The key to making money during these volatile events is to examine the proximate cause of the decline&a;nbsp;to determine whether the damage is overblown or permanent.

In this case, the proximate cause was President Trump&s;s tweets. The impact on Amazon&s;s stock was bigger than anyone expected partly because there were so many tweets spread out over about a week. Amazon wisely ignored the tweets until the president&s;s attention turned elsewhere which did not take that long from an investors standpoint.


See my previous coverage of&l;span&g;&a;nbsp;&l;/span&g;&l;a href=&q;http://mytrackrecord.com/stocks/amzn&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;Amazon&l;/a&g;. If you would like to be notified when I write about stocks you are following,&a;nbsp;&l;a href=&q;https://paths.marketocracy.com/lists/?p=subscribe&a;amp;id=1&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;click here&l;/a&g;.

&l;em&g;&l;a href=&q;https://rexjacobsen.mytrackrecord.com/RMF&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;Rex Jacobsen&l;/a&g;&a;nbsp;does&a;nbsp;not run a mutual fund.&a;nbsp;His fund is an investment option for clients of our&l;span&g;&a;nbsp;&l;/span&g;&l;a href=&q;http://paths.marketocracy.com/client&q; target=&q;_blank&q; rel=&q;nofollow noopener noreferrer&q; target=&q;_blank&q;&g;separately managed account program&l;/a&g;.&l;/em&g;&l;/p&g;

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