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What will it take for the Amazon stock to recover?

Amazon.com Inc (NASDAQ: AMZN) has a strong anchor in cloud and advertising, it’s the legacy retail business that needs to entertain the investors for…

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Amazon.com Inc (NASDAQ: AMZN) has a strong anchor in cloud and advertising, it’s the legacy retail business that needs to entertain the investors for the stock to recover, as per Rohit Kulkarni.

The bull case for the Amazon stock

The tech titan had its operating margin shrink to 3.2% in Q1 from 8.2% in the same quarter last year. This morning on CNBC’s “Worldwide Exchange”, the Internet Analyst at MKM Partners said:

Over the next 12 months, Amazon needs to grow its retail margins; expand to a level that could start showing signs of real sustainable profitability. That’s what Amazon investors are worried about right now.

Kulkarni is convinced Amazon will begin to improve its margins in the first quarter of 2023. The stock down 35% for the year currently trades at a PE multiple of 53.27.

Kulkarni is bullish on the new management

The MKM analyst also likes Amazon stock for the new management and sees upside to $180 a share. Last month, the American multinational named Doug Harrington as the CEO of its worldwide stores.

As we lab through the pandemic pull forward, inflation, and get new executives running full steam ahead, that’s the time to buy Amazon stock. If Harrington turns [retail] around and shows margins, that’s when you buy Amazon stock.

Under CEO Andy Jassy, who took over the helm last year, Amazon.com Inc has lost roughly $600 billion in market cap. The Nasdaq-listed firm is scheduled for its “Prime Day” – annual sales later this week.

The post What will it take for the Amazon stock to recover? appeared first on Invezz.

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International

The Digest #194

Poor Charlie’s Almanack, Ben Graham, GAAP accounting, John Templeton, AI dystopia, Inflation, Bloomstran on Berkshire, Intuitive Surgical, The lessons…

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Poor Charlie’s Almanack

Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger was first published in 2005 as a “coffee table” style book. It was beautifully presented but came with a high price tag. It was also heavy, somewhat unwieldy to read, and not very portable. The book’s format and price probably limited its reach. 

Stripe Press published a new edition of the book shortly after Mr. Munger died last year at the age of ninety-nine. Amazon and other vendors instantly sold all available inventory. After waiting for three months, I finally received my copy last week. 

Peter Kaufman is the editor of all editions of the book and I suspect that his main goal two decades ago was to honor Charlie Munger’s wisdom in a format that was not expected to “go viral.” In 2005, Charlie Munger was well known in the Berkshire Hathaway shareholder community and in the value investing world, but he was not as prominent as he became during his final decade. The clear purpose of the new edition is to disseminate his ideas as widely as possible. 

The new edition is abridged to reduce repetitive content and I will withhold judgment about the wisdom of this abridgment until I finish reading the book. Since the heart of the book is comprised of speeches given by Charlie Munger, there are definitely cases where the same ideas are presented again and again. 

Great books can be read many times while remaining highly relevant. I found this to be the case when I reread Charlie Munger’s Harvard School commencement address delivered in June 1986 when his youngest son was among the graduates. In the speech, Mr. Munger “inverts” the typical advice delivered in such speeches by explaining how the graduates should go about guaranteeing a life of failure and misery through time-tested strategies such as ingesting drugs and indulging in envy and resentment. 

I am not sure how many graduates were convinced by Charlie Munger on that early summer day, but I suspect that most of them remember the speech because it was so unconventional. In contrast, I have no recollection of the commencement addresses when I graduated from high school or college, or even who the speaker was.


Articles

A Memorial for Charlie Munger by John Harvey Taylor, March 12, 2024. This is a brief account of a recent memorial service for Charlie Munger at Harvard-Westlake School. “We learned Sunday that someone once asked if he knew how to play the piano. ‘I don’t know,’ he said. ‘I’ve never tried.’ Yet he tried and finished so much in his century. Imagine what he is making of eternity.” (Episcopal Diocese of Los Angeles)

Benjamin Graham: Big Moments on the Way to Big Earnings, March 2024. Ben Graham’s granddaughter reflects on the challenges Graham experienced when he applied for college. “Most graduating seniors make their college plans in advance, but Ben Graham had no money for tuition. All through the long days of arduous farm labor, my grandfather dreamed of winning a Pulitzer Scholarship.” (Beyond Ben Graham)

Graham’s “Unpopular Large Caps” Part 2: Thoughts on Diversification by John Huber, March 19, 2024. “I would segment these ideas into two groups: core operating investments and bargain assets. In the former, you want to be very selective in picking a relatively small number of companies you intend to own for the long term. In the latter, you’d want to think like the insurance underwriter, buying as many as you can to ensure that the law of large numbers is on your side.” (Base Hit Investing)

Warren Buffett Minds the GAAP by Donald E. Graham, March 13, 2024. “I have a challenge for the FASB and the SEC: If you believe today’s accounting rules present a clearer picture of Berkshire’s results, put it to a test. Ask Berkshire’s shareholders if they prefer the present method of reporting earnings over the status quo ante. I don’t believe a single informed shareholder would say so. The rule is confusing and uninformative.” (WSJ)

  • Berkshire Hathaway’s Distorted Quarterly Results, August 7, 2022. “Berkshire’s net income figure has been totally useless for analytical purposes since 2018. This is true on an annual basis and even more true on a quarterly basis.” (The Rational Walk)

Sir John Templeton: The Gentleman Bargain Hunter by Kingswell, March 12, 2024. “Templeton, who passed away in 2008, arrived on the investing scene with a series of uber-profitable contrarian bets in the early days of World War II — and continued to outwit Mr. Market with maddening consistency for the next several decades.” (Kingswell)

They Praised AI at SXSW—and the Audience Started Booing by Ted Gioia, March 19, 2024. Many recent innovations seem to have a dystopian aura. Apparently, this sentiment is not restricted to the usual luddites (old men shouting at clouds) but is shared by some of the attendees of SXSW. What seems cool to tech bros in Silicon Valley might not seem so cool to those outside tech culture. (The Honest Broker)

We Still Don’t Believe How Much Things Cost by Rachel Wolfe and Rachel Louise Ensign, March 12, 2024. People tend to focus on the aggregate amount of inflation over the past few years and interpreted transitory to mean that price spikes would reverse. Of course, politicians and economists only meant that the rate of inflation would decrease, not that prices would ever return to pre-pandemic levels. (WSJ)

My 2023 Apple Report Card by John Gruber, March 18, 2024. A solid report card overall from a widely read technology blog. (Daring Fireball)


Podcasts

Christopher Bloomstran on Buffett, Berkshire, Munger, and China, March 19, 2024. 1 hour, 1 minute. Video. Also be sure to check out the latest Semper Augustus client letter which has a lengthy section on Berkshire Hathaway. (Value After Hours)

Renaissance Technologies, March 18, 2024. 3 hours, 10 minutes. Notes“Renaissance Technologies is the best performing investment firm of all time. And yet no one at RenTec would consider themselves an ‘investor’, at least in any traditional sense of the word. It’d rather be more accurate to call them scientists — scientists who’ve discovered a system of math, computers and artificial intelligence that has evolved into the greatest money making machine the world has ever seen.” (Acquired)

Intuitive Surgical: Robotic Precision, March 20, 2024. 1 hour, 6 minutes. Transcript“Intuitive creates robotic products to assist minimally invasive surgeries. Its Da Vinci system is a pioneer in this area as it increases the efficiency & accuracy of surgery and reduces the burden on the surgeons themselves.” (Business Breakdowns)

The Lessons of History (Will & Ariel Durant), March 18, 2023. 53 minutes. Notes“In every age men have been dishonest and governments have been corrupt.” (Founders)

A Classicist Believes that Homer Directly Dictated the Iliad, and Was Also an Excellent Horseman, March 14, 2024. 53 minutes. “The Iliad is the world’s greatest epic poem—heroic battle and divine fate set against the Trojan War. Its beauty and profound bleakness are intensely moving, but great questions remain: Where, how, and when was it composed and why does it endure?” (History Unplugged)


Triumph of Achilles

Triumph of Achilles by Franz von Matsch, 1892 (public domain)

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

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International

Major airline learns its Chapter 11 bankruptcy fate

The airline industry has suffered since the covid pandemic changed how and when people travel.

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The covid pandemic dealt multiple blows to the airline industry. The first hit was simply that air travel largely went away for over a year, and international travel was hit even harder.

Airlines were barely flying and the planes that did take off had very few passengers. That did not mean that expenses stopped. Airlines still had to pay their employees and keep their fleet in working order.

Popular clothing retailer shuts down all its stores unexpectedly

Related: Popular clothing retailer shuts down all its stores unexpectedly

Basically, it was a period where a lot of money went out, but very little came in. That led to many airlines increasing their debt load at high interest rates while they put off every possible expense.

The second hit came when the impact of the pandemic gradually receded. People had learned that some travel that once seemed essential maybe wasn't.

A lot of companies cut back on business travel while international routes were slower to come back in any way. Losing business travelers who often paid for seats in Business or First Class robbed airlines — companies that desperately needed cash — of some of their best customers.

It's not that people no longer fly, but some in-person trips have become Zoom meetings, and many companies have cut back on trade shows, in-person meetings, and other events.

That situation has hit some airlines harder than others. It pushed one leading global airline into bankruptcy and the company has just learned whether U.S. courts have successfully approved its Chapter 11 filing.

Air travel has returned to pre-pandemic levels, but demand has shifted.

Image source: Shutterstock

SAS shared its Chapter 11 bankruptcy process

While many Americans don't know Scandinavian Airline SAS, it's a major global carrier. The company shared its mission on its website.

"Aviation is a vital part of Scandinavian infrastructure. We maintain the highest frequency of departures to and from Scandinavia and connect smaller regional airports with larger hubs. As part of Star Alliance, we fly our customers to 1300 destinations worldwide."

SAS does fly to a number of U.S. destinations, and its Chapter 11 bankruptcy was filed in an American court.

"The chapter 11 process is a legal process conducted under the supervision of the U.S. federal court system, which many large international airlines based outside of the U.S. have successfully used over the years to reduce their costs and complete financial restructurings," the company shared on its website.

It has been a long bankruptcy process as SAS first filed in July of 2022. The company has tried to reassure passengers and potential passengers that it had the money needed to keep operating.

"SAS’ operations and flight schedule are unaffected by the chapter 11 filing, and SAS will continue to serve its customers as normal. Importantly, we expect to have sufficient liquidity to support our business and meet our obligations going forward. SAS has obtained $700 million in Debtor-in-Possession (DIP) financing which provides SAS with a strong financial position to fund our operations throughout our restructuring process in the U.S.," the airline added.

SAS gets a Chapter 11 answer

SAS has received approval from U.S. Bankruptcy Judge Michael Wiles of the New York Bankruptcy Court to move forward with a plan that gives it $1.2 billion in new funding from a group that included the Danish government. 

"The winning bidder consortium consists of Castlelake, L.P., onbehalf of certain funds or affiliates, Air France-KLM S.A., and Lind Invest ApS, together with the Danish state," the airline shared on its website.

Junior creditors will receive a mix of credit and equity, totaling $350 million. SAS did not share how much of what the company originally owed was not repaid.

“The investment agreement that was approved by the court today is a key milestone in our SAS Forward plan, and it shows that our new investors believe in SAS and our potential to remain at the forefront of the airline industry for years to come" CEO Anko van der Werff shared.

"The restructuring will result in the cancellation of SAS equity, with no payments to existing shareholders," Reuters reported.

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Spread & Containment

Study: Life’s building blocks are surprisingly stable in Venus-like conditions

If there is life in the solar system beyond Earth, it might be found in the clouds of Venus. In contrast to the planet’s blisteringly inhospitable surface,…

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If there is life in the solar system beyond Earth, it might be found in the clouds of Venus. In contrast to the planet’s blisteringly inhospitable surface, Venus’ cloud layer, which extends from 30 to 40 miles above the surface, hosts milder temperatures that could support some extreme forms of life. 

Credit: Credit: JAXA/J. J. Petkowski

If there is life in the solar system beyond Earth, it might be found in the clouds of Venus. In contrast to the planet’s blisteringly inhospitable surface, Venus’ cloud layer, which extends from 30 to 40 miles above the surface, hosts milder temperatures that could support some extreme forms of life. 

If it’s out there, scientists have assumed that any Venusian cloud inhabitant would look very different from life forms on Earth. That’s because the clouds themselves are made from highly toxic droplets of sulfuric acid — an intensely corrosive chemical that is known to dissolve metals and destroy most biological molecules on Earth. 

But a new study by MIT researchers may challenge that assumption. Appearing today in the journal Astrobiology, the study reports that, in fact, some key building blocks of life can persist in solutions of concentrated sulfuric acid. 

The study’s authors have found that 19 amino acids that are essential to life on Earth are stable for up to four weeks when placed in vials of sulfuric acid at concentrations similar to those in Venus’ clouds. In particular, they found that the molecular “backbone” of all 19 amino acids remained intact in sulfuric acid solutions ranging in concentration from 81 to 98 percent.  

“What is absolutely surprising is that concentrated sulfuric acid is not a solvent that is universally hostile to organic chemistry,” says study co-author Janusz Petkowski, a research affiliate in MIT’s Department of Earth, Atmospheric and Planetary Sciences (EAPS).

“We are finding that building blocks of life on Earth are stable in sulfuric acid, and this is very intriguing for the idea of the possibility of life on Venus,” adds study author Sara Seager, MIT’s Class of 1941 Professor of Planetary Sciences in EAPS and a professor in the departments of Physics and of Aeronautics and Astronautics. “It doesn’t mean that life there will be the same as here. In fact, we know it can’t be. But this work advances the notion that Venus’ clouds could support complex chemicals needed for life.”

The study’s co-authors include first author Maxwell Seager, an undergraduate in the Department of Chemistry at Worcester Polytechnic Institute and Seager’s son, and William Bains, a research affiliate at MIT and a scientist at Cardiff University.

Building blocks in acid

The search for life in Venus’ clouds has gained momentum in recent years, spurred in part by a controversial detection of phosphine — a molecule that is considered to be one signature of life — in the planet’s atmosphere. While that detection remains under debate, the news has reinvigorated an old question: Could Earth’s sister planet actually host life? 

In search of an answer, scientists are planning several missions to Venus, including the first largely privately funded mission to the planet, backed by California-based launch company Rocket Lab. That mission, on which Seager is the science principal investigator, aims to send a spacecraft through the planet’s clouds to analyze their chemistry for signs of organic molecules. 

Ahead of the mission’s January 2025 launch, Seager and her colleagues have been testing various molecules in concentrated sulfuric acid to see what fragments of life on Earth might also be stable in Venus’ clouds, which are estimated to be orders of magnitude more acidic than the most acidic places on Earth.

“People have this perception that concentrated sulfuric acid is an extremely aggressive solvent that will chop everything to pieces,” Petkowski says. “But we are finding this is not necessarily true.”

In fact, the team has previously shown that complex organic molecules such as some fatty acids and nucleic acids remain surprisingly stable in sulfuric acid. The scientists are careful to emphasize, as they do in their current paper, that “complex organic chemistry is of course not life, but there is no life without it.” 

In other words, if certain molecules can persist in sulfuric acid, then perhaps the highly acidic clouds of Venus are habitable, if not necessarily inhabited. 

In their new study, the team turned their focus on amino acids — molecules that combine  to make essential proteins, each with their own specific function. Every living thing on Earth requires amino acids to make proteins that in turn carry out life-sustaining functions, from breaking down food to generating energy, building muscle, and repairing tissue. 

“If you consider the four major building blocks of life as nucleic acid bases, amino acids, fatty acids, and carbohydrates, we have demonstrated that some fatty acids can form micelles and vesicles in sulfuric acid, and the nucleic acid bases are stable in sulfuric acid. Carbohydrates have been shown to be highly reactive in sulfuric acid,” Maxwell
Seager explains. “That only left us with amino acids as the last major building block to
study.”

A stable backbone

The scientists began their studies of sulfuric acid during the pandemic, carrying out their experiments in a home laboratory. Since that time, Seager and her son continued work on chemistry in concentrated sulfuric acid. In early 2023, they ordered powder samples of 20 “biogenic” amino acids — those amino acids that are essential to all life on Earth. They dissolved each type of amino acid in vials of sulfuric acid mixed with water, at concentrations of 81 and 98 percent, which represent the range that exists in Venus’ clouds. 

The team then let the vials incubate for a day before transporting them to MIT’s Department of Chemistry Instrumentation Facility (DCIF), a shared, 24/7 laboratory that offers a number of automated and manual instruments for MIT scientists to use. For their part, Seager and her team used the lab’s nuclear magnetic resonance (NMR) spectrometer to analyze the structure of amino acids in sulfuric acid. 

After analyzing each vial several times over four weeks, the scientists found, to their surprise, that the basic molecular structure, or “backbone” in 19 of the 20 amino acids remained stable and unchanged, even in highly acidic conditions.

“Just showing that this backbone is stable in sulfuric acid doesn’t mean there is life on Venus,” notes Maxwell Seager. “But if we had shown that this backbone was compromised, then there would be no chance of life as we know it.” 

The team acknowledges that Venus’ cloud chemistry is likely messier than the study’s “test tube” conditions. For instance, scientists have measured various trace gases, in addition to sulfuric acid, in the planet’s clouds. As such, the team plans to incorporate certain trace gases in future experiments. 

“There are only a few groups in the world now that are working on chemistry in sulfuric acid, and they will all agree that no one has intuition,” adds Sara Seager. “I think we are just more happy than anything that this latest result adds one more ‘yes’ for the possibility of life on Venus.”

###

Written by Jennifer Chu, MIT News

Paper: “Stability of 20 Biogenic Amino Acids in Concentrated Sulfuric Acid: Implications for the Habitability of Venus’ Clouds”

https://www.liebertpub.com/doi/10.1089/ast.2023.0082


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