The World's Meanest Company
Amazon (NASDAQ: AMZN) might just be the meanest company there ever was. It is not content to simply carve out a solid niche in the online retail space. It seems CEO Jeff Bezos won't be happy until he crushes his competition. It really is a "winner takes all" mentality.
As you probably know, anybody can set up a store at Amazon and sell product through its platform. But don't be too good at it. Because if your store is highly rated and you're doing enough business, Amazon will come after you. The company will copy your product, undercut your price, and very likely tweak search results so shoppers will see the Amazon copy of your product first. How's that for cutthroat?
It's brilliant when you think about it. Amazon doesn't even have to pay for market research. It lets the people that sell on the Amazon platform do it for them. And when it sees a hot seller, boom, it takes it for itself.
And that's not all...
Amazon will also drastically cut the price of products when there are only a few remaining. Like say there's five of a certain purse left, or 10 pairs of a popular shoe remaining. Amazon will cut the price by a significant amount so that any other retailers who have "price match guarantees" or even algorithms that adjust prices automatically take the hit. It's a blatant attempt to cause other retailers to lose money. Amazon itself might sell five purses at a big discount, but a competitor might end up selling a bunch and losing a lot of money.
If you're in business and competing with Amazon, well, good luck. If you're an investor, Amazon's "win at all costs" attitude should make you very happy...
- Have you seen all the action in biotech lately? If you're not paying attention, you should be. Biotech stocks have been making some amazing moves lately.
Just two days ago, shares of Sarepta (NASDAQ: SRPT) jumped from around $28 to $50 on news that its headline drug won FDA approval. The shares are currently around $57.
Then yesterday, a little biotech called Tobira (NASDAQ: TBRA) jumped from $5 to $35 when Allergan (NYSE: AGN) announced it was buying the company out. Shares closed yesterday at $38, a huge 700% gain in one day. And FYI, a biotech called Regulus (NASDAQ: RGLS) is developing a drug in the same class as the one that fetched such a sweet premium for Tobira.
Earlier this year, in a March 30 article with the not-so-subtle title "Buy this Biotech," I told you about a company called Relypsa (NASDAQ: RLYP). Relypsa closed at $13.44 a share that day. And it traded as low as $12.80 on April 1.
Then on July 21, Relypsa got the buyout at $32 a share. If you bought the stock when I recommended it here in Wealth Daily, well, you did pretty well.
I've got another nice little biotech that I think has similar potential to double your money or more in the coming months. I'm still doing my due diligence on it, but I should be ready to let you know about it sometime next week, so stay tuned.
Also, keep an eye on Gilead Sciences (NASDAQ: GILD). I don't know if it's a buyout target itself or is on the hunt, but either way, shares are likely to go higher.
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- You probably know that the Fed finishes its regularly scheduled two-day meeting today. An announcement on interest rates is expected around 2 p.m. Yeah, the "will they, won't they" hype is getting ridiculous.
I've written plenty on the interest rate topic. Seems to me the Fed wants to hike rates but feels like it can't because it doesn't want to start a big stock market sell-off. Plus, higher rates will make the U.S. debt load tougher to deal with. So the Fed threatens to hike rates in order to keep a lid on speculation in the stock market and the high-yield bond market. This practice, known as "jawboning," has diminishing returns.
Much like how people stopped running to help the boy who cried wolf, investors give less and less credence to Fed officials when they say rates are about to go higher. Investors know it's a bluff, so they keep buying stock. I say it's time for the Fed to act.
The whole reason interest rates are as low as they are is because massive cuts were an appropriate response to the financial crisis. But here's the thing: that was seven years ago! The crisis is past; it's no longer an emergency. And what's more, the U.S. economy is very near full employment, and wages are starting to rise. Wage inflation has always been the key for the Fed...
So, my message to Yellen & Co is: hike rates a quarter point today. Please. The world will not come unhinged if you do, and rates need to be higher.
- Are you paying attention to Twitter (NYSE: TWTR)? The company started streaming Thursday night NFL games last week. It has 10 of these games this year, and the next goes tomorrow night.
Twitter has been frustrating investors for a while now. But I remain convinced that there is value there. Twitter is where news breaks, and the streaming sports thing is just getting going. If current management can't figure it out, somebody else will.
I've been trading Twitter for a couple months now with call options. A longer-term investor might want to just wait for a drop and then take a position.
Until next time,
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.
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