Jeff Bezos, the founder of Amazon.com, became the
world's richest man in 2018 as the company's stock
price surged. In recent months, he sat down for a
discussion at The Economic Club of Washington,
D.C. During the conversation, Bezos touched on one
of the core principles of value investing: stocks
represent ownership in a business.
The interviewer, David Rubenstein, asked Bezos to
reflect on the late 1990s when the "Dot Com"
hysteria was underway. Bezos recalled that at the
peak of the bubble, Amazon's stock price touched
approximately $113. Within 12 months, the price
had collapsed to $6. That works out to a nearly 95%
decline.
But what Bezos said next is the most important
thing, "The stock is not the company, and the
company is not the stock" During the stock rout,
Bezos described living in a parallel universe of a
plunging stock price all the while Amazon's actual
business was improving rapidly. He ticked off
numerous internal operating metrics such as,
number of customers, profit per unit, defective
products, etc., all of which were getting better!
We all know the rest of the story. In 2018, Amazon
became one of the most valuable companies in the
world. The company continues to expand rapidly,
disrupt new industries and generate record profits.
The stock price peaked at over $2,000 per share
earlier this year.