Many investors believe that Google, with its capture of the market for information in this information age, is the tech stock to bank on. But now some investors are taking another look at the upsides of Amazon.
Steve Hanke and Ryan Guttridge, economists at Johns Hopkins University, have coined what they call the “Amazon Puzzle,” according to a Bloomberg story. The key, they say, is to look at a company’s sales divided by its total assets, what is known as asset turnover. The higher a company’s asset turnover is, the better it is as an investment.
By this measure, Amazon an asset turnover of around two, about four times higher than Google, which hovers at around 0.5. Amazon stock has returned more than 62 percent to investors over the past year, compared to less than 10 percent for Google.
The economists credit Jeff Bezos, the Amazon chief executive, for his approach that favors managing a tight cash flow and maintaining a salary that is tied to performance. In addition to his modest salary, Bezos is compensated through the same stock class that the public can buy, holding 18% of the company’s shares. By contrast, Google’s top executives hold large amounts of classes of stock that are unavailable to outside investors.