What the Heck is Amazon -- PE of 134 – Doing in Legg Mason’s Value Equity Fund?
As Bill Miller passes the reins to the Legg Mason (LM) Value Equity fund to Sam Peters, one of his co-managers on the fund since late 2010, one wonders how long will the fund hold onto Amazon (AMZN), trading at 134 times its anemic trailing earnings.
In its year-end report, Legg Mason said the fund was able to take "advantage of the volatility to position the portfolio in what we believe are among the best values in the market." That meant a portfolio-wide PE below 10.
Some of the cheaper stocks in Miller's portfolio include Chevron (CVX), current PE of 7.8; Annaly Capital (NLY), current PE of 8.1; and ConocoPhillips (COP), current PE of 8.2.
Amazon’s an outlier. The stock has had an impressive run. But the underlying company is encountering severe headwinds, which YCharts has reported on often.
Amazon.com PE Ratio Chart by YCharts
Popular Amazon Prime has driven shipping costs up faster than sales. Employment has its ballooned. And Amazon warns of a potential loss in the current quarter.
Legg Mason said its portfolio had a return on invested capita of about 34% overall. Amazon certainly doesn’t.
Amazon.com Return on Invested Capital Chart by YCharts
Whether one lines cheap stocks or not, given Amazon’s declining profits, it's tough to see it as a value proposition.
Amazon.com Revenue Growth Chart by YCharts
Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings, stock screener and portfolio strategies.
Filed under: Investing Ideas
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