The Allianz Technology trust (ATT) has slashed its exposure to US e-commerce behemoth Amazon, from 7% 12 months ago to just 1% today, due to worries that the firm’s more aggressive business investment will not translate through to higher sales growth.
In October 2018, Amazon CEO Jeff Bezos said Q3 profits at his $880bn firm had been hit in Q3 thanks to increased investment into its next-day delivery service offered to Prime Loyalty customers.
Net income fell to $2.1bn in Q3 2018 compared to $2.9bn in Q3 2017.
That did not go down well with investors and the stock, which had already slipped 12% from its all-time high in September, fell a further 14%.
Walter Price, ATT's San Francisco-based manager, was one of those disappointed shareholders.
ATT's stockmarket filings show Amazon accounted for 7.1% of its portfolio - or £33m of its net asset value (NAV) - as at 30 November. By 31 January, that had fallen to 6.3%.
However, the largest swathe of selling came in February. Price offloaded more than £15m worth of Amazon stock in the month, taking Amazon from ATT's largest holding at end-January to its tenth largest at end-February, when it accounted for 2.8% of the portfolio, or £14.1m of NAV.
Price said the firm is now just 1% of the portfolio.
He also said the reason Amazon invested in one-day delivery was because its e-commerce business had dropped to a growth rate below 20% in the US for the first time ever.
The investments have had the desired effect of forcing that growth rate back above 20%, but it has come at a price as earnings have halved over the past year.
"As e-commerce continues to grow that delivery network they rolled out and those distribution centres that they had to put in place should get more utilisation and profitability should start to improve," he said.
Price said if he got a sense that those investments were paying off, he would look to rebuild his position. However, whether they will or not "is still unclear".
The manager added the reason he is hanging on to a small position in the firm was the Amazon Web Services (AWS) business, which is its cloud computing platform.
"Probably half the value of Amazon is in AWS," he claimed, adding he was still bullish on that division.
However, he continued: "We have got questions about the Amazon part of the business; if we felt that the AWS business had questions, then we would get rid of [the holding altogether]."
In the 12 months to 12 November, ATT has returned 21.7% compared to its AIC Technology & Media sector average 18.5%, according to
Over five years to 12 November, the trust is up 191.6%, compared to its sector peers' 175.3%.