Legendary hedge fund manager Stanley Druckenmiller says he loves Amazon because, unlike IBM, it’s not focused on short-term quarterly earnings.
“The last 19 quarters, Amazon has missed their quarterly earnings nine times. They don’t give a damn,” Druckenmiller said at the Dealbook Conference on Tuesday.
“IBM has missed three quarters since 2006. They really care about their quarterly earnings.”
Druckenmiller’s Duquesne Capital — a family office — bought Amazon shares during the third quarter, Business Insider has learned.
Druckenmiller has previously criticised IBM for its stock buybacks, referring the company as a “poster child” for bad corporate growth.
IBM has seen 14 consecutive quarters of dropping sales, but that’s not their only problem. Druckenmiller noted that IBM has shrunk its R&D as a percentage of sales.
“They are under major attack from Amazon, Palantir, all these companies out there are eating away,” he said. “Their R&D has shrunk in absolute terms and as a percentage of their sales.”
He pointed out that Amazon has increased its R&D.
‘I love Amazon’
“Oh yeah, I love Amazon,” Druckenmiller said. “Because they’re investing in their future. Bezos is a serial monopolist,” he said, referring to the company’s founder.
Druckenmiller particularly likes Amazon’s profitable cloud-computing business Amazon Web Services.
“He’s come up with this AWS, which is absolutely exploding….If you’re starting a business today, you don’t need a tech department, you don’t need a back office, you can use AWS. By the way, it’s just ripping to shreds the ten or fifteen consultants from IBM…that you used to need, but you don’t need because now you go into cloud.”
Druckenmiller is convinced that eventually will eventually increase its profit margins on AWS.
Dealbook’s Andrew Ross Sorkin also asked Druckenmiller for his opinion on Netflix.
“Same thing,” he said. “I only heard 30 seconds of [CEO Reed Hastings]…but when he said ‘if you manage for quarterly earnings you’re dead.’ Then somebody on CNBC says, ‘well it’s easy for him to say with a stock price like that.’ Well, well why do you think he has a stock price like that? Because he thought about the long term and not cared about quarterly earnings and all this short termism the whole time.”
Watch the video below (start at 13 minute mark for Amazon comments):
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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