In October 2007, Crocs (NASDAQ:CROX) shares fetched nearly $70 a share giving the company a market value of $6 billion. This for a company that makes plastic shoes! Nothing against plastic shoes, but $6 billion?
I remember looking at other $6 billion companies at the time. One example: Whirlpool (NYSE:WHR). It had the same market value as Crocs. The largest appliance manufacturer on the planet vs. plastic shoes. In 2007, Whirlpool made over $600 million. Crocs? $168 million. But Crocs was growing! Or not. It’s lost money ever since. Compare the market values now!
Amazon (NASDAQ:AMZN) isn’t the fad that Crocs was, but its fans are just as devoted. The logic is the same too. I love the product therefore I love the stock. There is little (if any) regard for underlying fundamentals.
The current market value of Amazon is $60 billion. For this "price", an investor could buy eBay (NASDAQ:EBAY) with a current market value of $30 billion and Costco (NASDAQ:COST) with a value of $26 billion. With the petty cash left over, our retail shopper could pick one of the following from the discount aisle:Netflix (NASDAQ:NFLX) just had to include this one
Dicks Sporting Goods (NYSE:DKS)
Each has a market value of $3 to $4 billion.
With Amazon, you get a company with $4 billion in net cash and around $1 billion in free cash flow. And don’t forget the growth!
With our Amazon alternative, we’d get at least $6 billion in net cash and about $4 billion a year in free cash flow. This portfolio has growth too. If you’re not that committed to retail, just buy Disney (NYSE:DIS) and throw in Dicks (DKS) for kicks.
The Amazon alternative offers 50% more cash and $3 billion in additional free cash flow for the same price. Time value of money? Growth? Either way, Amazon will never catch up.
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