Weekly Brief #59
Amazon vs. Temu, intensified... Plus, New York fines Oil & Gas $75 billion, Nordstrom taken private for $4 billion, Apple joins Google’s antitrust lawsuit, Netflix wins India’s WWE rights, and more.
Good morning investors 👋,
Welcome back to the 59th Weekly Brief.
Wow, just like that, Christmas is over. And by next week, so will be the year 2024. Should I cry about how quickly this year has passed? Should I be happy the markets are open again? Well, I won’t blame anyone for answering yes to both of these questions. I hope you all enjoyed the holidays with your family.
As we approach the end of 2024, I’d like to express my warmest gratitude to all who’ve stuck with me this year on my newsletter and more. I also want to encourage everyone reading: feel free to email me, comment, or send me a DM on Substack or Blossom anytime. This newsletter isn’t sent out by some marketing team to occasionally bypass your junk folder and exploit your wallet—there’s a down-to-earth, enthusiastic, self-directed investor behind these emails. Someone who loves writing, loves to better himself, and loves sharing and gaining knowledge with others on money-related topics. That someone would be me. So please, share your thoughts, give me your feedback anytime, and I’ll respond.
Whether it’s concerns with the paid membership and ways to improve it with more content, or ideas for future posts—whatever it is, I’ll always answer. And I love answering. Keep this in mind for the future, and enjoy today’s post.
Let’s get into it. (12 min read)
In this issue:
🛍️ Amazon vs. Temu, intensified
🔍 Apple joins Google’s antitrust lawsuit
🛢️ New York fines Oil & Gas $75 billion
FEATURED STORY
🛍️ Amazon vs. Temu, intensified
Around three months ago, I replied to a Twitter post asking what my largest stock position was. At the time, it was Amazon, and many of you reading this may know that my largest position today is still Amazon. Someone replied to this reply of mine (where I shared a screenshot of my Amazon position), and thus, a back-and-forth began. I don’t use Twitter anymore as it’s become a politicized mess, but a lot has changed in the past two months for Amazon.
Thanks to the recent news of Amazon reportedly asking Chinese cross-border merchants to stop listing on Temu1, it made me recall this thread of mine. Why did I recall this thread specifically? Because it turns out, what I was arguing about on Twitter three months ago wasn’t just factual, but has been more than proven in recent weeks and months.
I won’t go into too much depth here, as I’ve covered my thoughts on this topic many times in the past. Today, I simply want to share this thread and the conversation below because I thought it was interesting to look back on and see how things played out since then. It’s awesome to see Amazon evolve and beat my personal expectations in just this short amount of time, and I believe it’s a nice reminder to always give your holdings some time to play by a thesis. (And this has only been three months!)
I’ll refer to the other contributor in the thread as “he.”
Amazon vs. Temu: The Debate
[Post asks: “What is your largest portfolio position?”]
I reply: Amazon, the most unimplemented, underappreciated growth opportunity in big tech.
He replies: Basically Temu nowadays with the cloud-based stuff.
I reply: [Yes, but also] advertising, and streaming, and robotics, and LLMs … among a few.
He replies: The more people realize that you can get the same products for 1/10th the price, people move. Temu will get faster and faster shipping, and everybody will jump ship. Prime Video is, besides two to three good shows a year, not good; others are better at LLMs, IMO.
I reply: People want reliability. If you consistently order from Temu, you’ll know they are not reliable. It’s mostly crap products for cheap prices. Shipping is also not the best at all. Amazon has already said they plan on making a discount store competitor to Temu. I’m sure people will much prefer the reliability and shipping times of Amazon over Temu any day, including if prices are on par with both stores. Prime Video has had many hits that reach the most-watched shows on streaming, and Amazon’s investments in content, specifically sports, will solidify Prime Video as a leader in streaming over the next decade or longer—potentially even earlier. TV show and movie hits will only get more and more common for Prime Video as they grow. [Screenshot of popular Prime Video shows]
He replies: All the products on Amazon are the same as on Temu, with the addition of some brand products like TVs or smartphones. They are sent to Amazon by dropshippers. All Amazon wants to do is cut out the dropshippers and import the things themselves, then reduce prices by a tiny amount.
A wallet might cost $30 on Amazon right now, while it is $3 on Temu. Amazon wants to sell it for $18, for example. Temu will build out their warehouses in the US and Europe by immense amounts in the coming years and be competitive to provide delivery within the week consistently. All Amazon has going for them is data centres. Prime Video doesn’t make money.
I reply: True, there are some dropshippers on Amazon, as there are on all e-commerce platforms. I myself dropship on eBay. But saying Temu will win against Amazon is flawed… very flawed. Amazon’s value proposition goes beyond just prices into fast, reliable shipping, amazing customer service, a trusted brand with a trusted return policy, and the Prime ecosystem.
You mentioned Prime Video doesn’t make money, but it makes $4 billion in annual ad revenue currently. If you mean profitable cash flow, then sure, Prime Video is a loss leader right now. However, it’s a value proposition that by far beats out Temu. No one is going to drop their Prime subscription in favour of a cheaper price for a wallet. It’s just not going to happen. They’ll just keep using their Prime subscription and keep buying from Amazon. Temu will build out warehouses in the West, but never will they ever rival that of Amazon in logistics.
Never will Temu get same-day shipping or two-day shipping without billions of dollars and a massive amount of time. Amazon is leagues ahead—football stadiums ahead [so to speak]—of Temu in logistics. And by the way, AWS is not the only profitable or important part of Amazon. Third-party logistics services, Amazon Ads, subscription revenue—these are very reliable and profitable sources of revenue for Amazon on top of AWS. And there is so much more than just these streams… what about the future revenue streams? [What about AI]?
Price doesn’t shift consumer loyalty and the decade-long relationship between value and price of a business and its customers. If that were true, I wouldn’t be using an iPhone, and the entire world would be driving no-brand cars. Amazon’s long-term vision is much better than Temu. Its
[Thread end]2
Since this thread, Amazon has announced Amazon Haul (Amazon’s low-cost Temu competitor), Beast Games went live (MrBeast’s Prime Video show), and Amazon Nova (Amazon’s suite of GenAI3 models).
All of this comes to more than support the claims I raised in this Twitter thread just three months ago. Again, these announcements were just in the past three months. We’re talking a quarter of one year, which is a very short amount of time in the stock market—a single quarter for Amazon to prove itself 100x over as a global leader in streaming, a competitor to Temu, and GenAI. All at once. I continue to be bullish on Amazon and will continue to hold onto my shares for, hopefully, many years to come.
I hope this Twitter thread and my added thoughts provided some substance for you to learn at least something from, and I wish you an amazing rest of your day (once you finish reading the rest of this issue and check out this week’s book recommendation, that is. Enjoy!).
My full Amazon analysis:
FINANCE
a. 🛢️ New York fines Oil & Gas $75 billion
The state of New York is set to fine fossil fuel companies up to $75 billion over 25 years to cover climate damage costs under a new law signed by New York Governor Kathy Hochul this Thursday (photo above). These funds will be put towards climate mitigation: upgrades to roads, transit, and infrastructure to fit the sustainability transition. The fines start in 2028, and target all companies responsible for over 1 billion tons of greenhouse gas emissions from 2000 to 2018.
Fossil fuel companies have raked in trillions of dollars in profit since the beginning of the pandemic, all despite knowing their obvious impact on the climate since as early as the 1970s. According to Reuters, climate adaptation will cost New York over $500 billion by 2050. The companies in question include Exxon Mobil, Conoco Phillips, Shell, Chevron, and more.
b. 👚 Nordstrom taken private for $4 billion
Nordstrom, the what’s now a 123-year-old department store, has been acquired and will be taken private by the Nordstrom family and Mexican retail group El Puerto de Liverpool SAB de CV (Liverpool), to further compete with discount retail chains after years of struggles. Shareholders will receive $24.25 per share, or a 42% premium to the last closing price, bringing the total technical value of the acquisition to $4 billion.
The Nordstrom family will continue to hold majority ownership of the new company. Liverpool will assume over $2 billion in debt. The acquisition is expected to close in early 2025.
BUSINESS
c. 🔍 Apple joins Google’s antitrust lawsuit
Apple now wants to get in on Google’s upcoming antitrust trial for its monopoly on online search, on the basis that it cannot rely on Google to represent its interests and defend its revenue-sharing deals that generate tens of billions for the company every year. These agreements in question make Google the default search engine on Apple’s Safari browser across its ecosystem of products, where Apple is assumed to be paid an estimated $15 billion from Google, annually.
Google, in response to its many DOJ threats like company breakups, has proposed weakening its default agreements with device manufacturers, which is why Apple thinks Google doesn’t represent its interests anymore. Apple has said in court filings before that it doesn’t plan to enter the search market even if these default agreements cease to exist.
Related articles:
d. 📹 Netflix wins India’s WWE rights
World Wrestling Entertainment (WWE) will transfer its media rights in India from Sony to Netflix starting in April 2025 as part of its global 10-year, $5 billion agreement between its parent company and Netflix signed back in January. This will be Netflix’s first entry into Indian sports entertainment.
Sony had previously renewed its WWE rights in 2020 for $180–210 million over five years, and had plans to retain them, but as Netflix seeks exclusivity in India to align with streaming’s global strategy shift to live entertainment, Sony couldn’t catch up. Netflix still continues to face competition from Disney+ Hotstar who currently leads India’s streaming market.
POLITICS
e. 🇷🇺 Russian air-defense downs Azerbaijan plane
According to four anonymous sources leaked to Reuters (sources in close touch with the investigation), a Russian air defence system has been linked to the downing of an Azerbaijan Airlines aircraft this week, a crash that killed 38 of 67 passengers. Flight J2-8243 was the specific flight, which crashed into a fireball near Aktau, Kazakhstan, after diverting from southern Russia, where Russia has been using air defences against Ukrainian drones.
This crash is entirely on video.
No intent has been found, and investigations are not yet finished, but both NATO and Azerbaijan wish for Russia to acknowledge responsibility within the coming weeks. Russia has since warned against speculation before the investigation is complete. The Russian aviation authority has suggested the cause was due to a bird strike (which means exactly what it sounds like).
I must clarify for my safety4: All of the above is alleged.
Related articles:
📚 Book of the Week
For every book purchased using the links below, 100% of affiliate commissions are donated to charity. (Amount donated so far: $31.11.)
My full bookshelf: Here.
Hidden Potential - Adam Grant
Book Description:
We live in a world that’s obsessed with talent. We celebrate gifted students in school, natural athletes in sports, and child prodigies in music. But admiring people who start out with innate advantages leads us to overlook the distance we ourselves can travel. We underestimate the range of skills that we can learn and how good we can become. We can all improve at improving. And when opportunity doesn’t knock, there are ways to build a door.
Hidden Potential offers a new framework for raising aspirations and exceeding expectations. Adam Grant weaves together groundbreaking evidence, surprising insights, and vivid storytelling that takes us from the classroom to the boardroom, the playground to the Olympics, and underground to outer space. He shows that progress depends less on how hard you work than how well you learn. Growth is not about the genius you possess—it’s about the character you develop. Grant explores how to build the character skills and motivational structures to realize our own potential, and how to design systems that create opportunities for those who have been underrated and overlooked.
Many writers have chronicled the habits of superstars who accomplish great things. This book reveals how anyone can rise to achieve greater things. The true measure of your potential is not the height of the peak you’ve reached, but how far you’ve climbed to get there.
Thanks for reading. Feel free to reply to this email or comment on the web if you need anything—I always reply. If you enjoyed today’s issue, feel free to share it with friends and family.
All the best,
Jacob
All my links here.
I would like to share my quick thoughts on this as well:
Amazon has responded to this situation by saying they haven’t been doing this (although they didn’t say that directly). However, if they are, that would mean one of two things: One, Amazon is feeling pressure from Temu even though there is no effect on the financials of the company. Two, Amazon is leveraging its scale and massive reach over consumers to lure Chinese consumers away from Temu by “scaring” merchants into picking a side, essentially. A game Amazon is, by the odds, going to win, since Amazon holds the scale. Merchants want scale.
(I fixed grammatical and spelling errors throughout this thread/debate. Aside from this, nothing else was edited.)
Short for Generative Artificial Intelligence (GenAI).
I’m being facetious here, of course.
Any oil company threatened by New York should pull out of that state immediately. Close all there fuel stations including heating fuel and for power plants. Then Kathy Hochul can see what kind of a wasteland New York State will quickly become.