REITs and Amazon: Diverse Investment Opportunities in Today's Market

The REIT Way To Invest

Looking for more investing ideas like this one? Get them exclusively at iREIT® on Alpha. Learn More " Stocks were absolutely smoked on Wednesday, especially the tech-heavy Nasdaq. "Tech stocks took a drubbing on Wednesday after lackluster Alphabet and Tesla earnings stirred up worries that Big Tech's power to fuel gains is fading... "Stocks [sank] as investors digest mixed quarterly earnings from Google parent Alphabet (GOOGL, GOOG) and Tesla (TSLA), the first of the 'Magnificent 7' mega caps to report. EV maker Tesla's stock price slid more than 12%, while Alphabet shares dropped more than 5%. "In aggregate, the Magnificent 7 tech stocks lost more than $750 billion in market cap on Wednesday, the most on record for the group. "Chip stocks also tumbled... as Nvidia (NVDA) fell almost 7% while Broadcom (AVGO) and Arm (ARM) each dropped about 8%." "Barron's, for its part, adds that, "Investors are also likely double-guessing their take on artificial intelligence and whether the massive investments will see the payoff they've imagined." And as for the larger selloff: "Former New York Fed President Bill Dudley, meanwhile, said the Federal Reserve should cut rates in July, sparking questions of whether there's weakness in some pocket of the economy that the markets are missing." And so, instead of investigating that concern, investors sold everything. That's what happens when you're investing on enthusiasm alone. Essentially, everyone panicked on Wednesday's news, turning previous hope-based hype on its head. There's little else to say about it, except that I'm sincerely sorry for anyone who saw their positions plummet. On the plus side, all three of the major indices are still very much up year-to-date. So there's that. And despite its near-7% drop, Nvidia is still a massive winner for anyone who's held it since January, much less before. Here it is compared to the rest of the Magnificent 7: The darker blue line, if you can't see, marks Nvidia's progress year-to-date. While that other blue line way down at the bottom represents Tesla. Pink is Google. Orange is Meta Platforms (META). Yellow is Netflix (NFLX). Green is Amazon (AMZN). And purple is Apple (AAPL). There's a clear winner here, even with this month's falls from favor. I'm the first person to give credit where credit is due. But I'm also still more than content not owning it. Why should I when there are plenty of undervalued, dividend-paying stocks out there I don't have to second-guess myself about. This, of course, includes real estate investment trusts, or REITs. I know real estate suffered on Wednesday too. The Vanguard Real Estate Index Fund ETF Shares (VNQ), which holds so many of these publicly traded positions, dropped $1.32, or 1.47%. I'll also acknowledge that even some high-quality REITs, like Federal Realty Investment Trust (FRT) - a dividend king, for heaven's sake - dropped over 2.22%. On no news at all! In which case, it's clear that, like Big Tech, REITs can experience volatility. Even so, I'll take that possibility along with the far smaller share price gains in favor of recurring, rising dividends. That and the fact that, like I said, I can wrap my head around their real value - past, present, and future alike. I appreciate innovative products and services. There can be real value in companies that cannot just roll with the times, but actually create them. The possibilities surrounding AI are significant. It could transform education, healthcare, finance, transportation, manufacturing, marketing, entertainment... Basically, every aspect of our lives could take intense turns for the better with AI adaptions. (They could also take dramatic turns for the worse, but let's stay positive here.) So I understand why these advancements get investors excited. Yet, there's a lot of "could" there that makes me uncomfortable. Almost two months ago, The Wall Street Journal published a piece titled "The AI Revolution Is Already Losing Steam." Its tagline: "The pace of innovation in AI is slowing, its usefulness is limited, and the cost of running it remains exorbitant." It's a compelling piece, and - whether it's ultimately wrong or right - it backs each of those summary points up with paragraphs worth of facts and figures. But it's the article's conclusion that really stands out to me: "None of this is to say that today's AI won't, in the long run, transform all sorts of jobs and industries. The problem is that the current level of investment - in startups and by big companies - seems to be predicated on the idea that AI is going to get so much better, so fast, and be adopted so quickly that its impact on our lives and the economy is hard to comprehend." That's why I say Nvidia's current valuations are hype-based. It's not to insult the company, what it does, or who believes in it. It's simply to say that I want something more concrete. Like real estate. Real estate has been around for millennia. And unless we somehow manage to become online entities, it's going to be around for quite a while more. Will our exact uses for real estate change? Of course. REITs themselves have added plenty of subsets since first being recognized in 1960. Likewise, our evaluations of property value fluctuate. But the larger need for brick-and-mortar buildings is pretty much set in stone. It's something we can count on. And I, for one, feel comfortable investing in that actuality. VICI is a real estate investment trust that owns and operates a portfolio of gaming, hospitality, and entertainment properties across 26 U.S. states and 1 Canadian Province. The company was formed in 2017 as a spin-off from Caesars Entertainment (CZR). It has grown to become a leading REIT in the gaming industry with a market cap of approximately $31.9 billion and a 127.0 million SF portfolio comprising 54 gaming facilities and 39 non-gaming experiential properties. The company's gaming portfolio includes approximately 4.2 million SF of gaming space. That includes over 60,000 hotel rooms, 6.7 million SF of meeting and convention space, over 500 food and beverage outlets, including bars, restaurants, and nightclubs, as well as 500 retail outlets and more than 50 entertainment venues. Additionally, the company owns 4 championship golf courses and more than 25 acres of undeveloped land next to Planet Hollywood, as well as 7 acres of strip frontage at Caesars Palace. VICI has gaming properties located in 15 states, but its primary market is Las Vegas, which represents ~47% of its gaming portfolio. The company has 10 trophy properties on the Las Vegas Strip including Caesars Palace, the Venetian Resort, the Mirage, Park MGM, Excalibur, Harrah's, and MGM Grand. In total, VICI owns more than 650 acres of land, roughly 41,000 hotel rooms, and nearly 6.0 million SF of convention space on the Las Vegas Strip. VICI's non-gaming portfolio primarily consists of family bowling entertainment centers, which it acquired last year in a sale leaseback with Bowlero Corp (BOWL). In October 2023, VICI completed the acquisition of the Bowlero Properties for $432.9 million at a 7.3% cap rate. The initial annual cash rent is nearly $32.0 million with contractual rent escalation equal to the greater of 2.0% or CPI, subject to a 2.5% cap. The initial lease term is for 25 years and has multiple 5-year renewal options. At the time of the acquisition, BOWL had 2023 pro forma corporate level rent coverage of 3.2x. Investors had a mixed reaction to the BOWL acquisition, but on the whole I think it was a good move as the concept aligns with VICI's experiential investment criteria and the purchase further diversifies the company's portfolio. Moreover, it adds a new tenant operating in a new sector, and adds new assets across 17 states, including 11 states that are new to VICI. VICI leases its properties under long-term, triple-net lease agreements, which provide stable and reliable cash flows with long-tern visibility. The triple-net lease structure also makes the operator responsible for expenses such as property tax, insurance, and maintenance. All of VICI's leases are triple-net and more than 90% have a parent guarantee in place. Additionally, 81% of its rent roll includes master lease protection and 80% of its rent roll includes tenants that report to the Securities & Exchange Commission ("SEC"). VICI's leases are structured on a very long-term basis. When including extension options, its portfolio has a weighted average lease term ("WALT") of 41.5 years. This provides for stable income with long-term visibility while minimizing VICI's operating expenses. The company's tenant roster has many favorable attributes, but it is very concentrated, with only 13 tenants. Furthermore, it is especially concentrated in its top 2 tenants, Caesars Entertainment and MGM Resorts, which combined make up roughly 74% of VICI's annual rent. Normally, I'd run from such tenant concentration, but in VICI's case, the situation is unique. VICI is one of the few REITs I consider to have a true defensive moat due to the iconic nature of its properties. A tenant can easily move to a different retail outlet, or to a different shopping center, but Caesars Palace on the Las Vegas Strip is virtually irreplaceable. CZR would find it very difficult to operate without the real estate supporting its operations. The company cannot just up-and-move on a whim, and would likely go to great lengths to keep its place on the Las Vegas Strip. A convenient store operator has many options on what property it leases, but a gaming operator that needs high-class amenities, hotel rooms, restaurants, and an iconic destination does not. The last thing I'll say regarding its tenant concentration is that these are very well capitalized companies with deep resources. Especially its top 2 tenants, Caesars and MGM Resorts. While I never like high tenant concentration, in VICI's case there are features that mitigates the risk. The moat surrounding VICI has helped the company maintain 100% portfolio occupancy and achieve 100% rent collection since its formation. Another interesting aspect of VICI is the speed at which it went from a spin-off to an S&P 500 company with an investment grade balance sheet. As previously mentioned, VICI was spun-off in 2017 from Caesars Entertainment and received several assets operated by Caesars as part of the deal. The company acquired Harrah's Las Vegas in 2017 before completing its initial public offering ("IPO") in 2018, which was the 4 largest REIT IPO on record. Later that year, it expanded its tenant roster with the addition of PENN Entertainment and continued to diversify its tenant base with the additions of Hard Rock, JACK, and Century Casinos in 2019. Over the following years, the company grew through investment and acquired many key properties, including Chelsea Piers and the Venetian Resort. By 2022, just a handful of years after its spin-off and IPO, the company was included as an S&P 500 member and earned an investment grade credit rating (BBB-). Since then, VICI has continued to invest and expand its portfolio. Last year, the company acquired the remaining 49.9% interest in the MGM Grand / Mandalay Bay and added a new vertical with its acquisition of the Bowlero properties. In total, from the 2017 spin-off to 1Q-24 annualized, VICI has grown its adjusted EBITDA by roughly 330%. The rapid growth of VICI's portfolio has been accretive and is reflected on the bottom line. The company has an average Adjusted FFO ("AFFO") growth rate of 6.77% and an average dividend growth rate of 10.11% over the past 5 years. Analysts expect AFFO per share to increase by 5% in 2024, and then increase by 4% in both 2025 and 2026. VICI has an investment grade balance sheet with a BBB- credit rating from S&P Global and solid debt metrics, including a net leverage ratio of 5.4x (net debt / adj. EBITDA), a long-term debt to capital ratio of 40.82%, and an EBITDA to interest expense ratio of 4.19x. The company's debt is 83% unsecured and 99% fixed rate. At the end of the first quarter it had approximately $3.5 billion in liquidity, and the company's debt maturity schedule is well staggered with a weighted average term to maturity of 6.8 years. VICI is a triple-net lease REIT that should continue to generate stable and reliable cash flows for the long term. The company's properties are experiential, which insulates it from the threat of e-commerce, and iconic, which gives the company a true defensive moat. VICI has grown at a rapid clip since its formation, while maintaining a conservative capital structure and a fortified balance sheet. Demand for the Las Vegas experience should continue to grow, and legal gambling is not going anywhere. VICI pays a 5.46% dividend yield that is well covered with a 2023 AFFO payout ratio of 74.88% and its stock is trading at a P/AFFO of 13.80x, compared to its average AFFO multiple of 15.93x. TRNO is an internally managed REIT based out of San Francisco that specializes in the acquisition and management of industrial real estate across 6 major coastal markets which include: Los Angeles, New Jersey / New York City, Miami, Seattle, San Francisco, and Washington, D.C. The company has a market cap of approximately $6.7 billion and a 17.4 million SF portfolio comprising 290 industrial properties and 45 improved land parcels totaling 152.4 acres, as well as 1.6 million SF of properties under development or redevelopment. Terreno looks to acquire functional and flexible industrial properties in infill locations that are located in high-demand, supply constrained markets. The company also targets locations that are near large population centers and transportation hubs and looks for properties that can serve multiple tenants and support distribution, e-commerce, and general logistics activities. TRNO's portfolio includes various industrial properties and other assets including warehouse / distribution, flex / light industrial, transshipment, and improved land. The company receives roughly 76.8% of its annualized base rent ("ABR") from its warehouse / distribution properties, which include single and multiple tenant facilities that are typically larger than 10,000 SF. Terreno derives roughly 12.4% of its ABR from its improved land that is used for industrial outdoor storage, which can include truck, trailer, and vehicle parking. These improved land parcels are also held as they may be redeveloped at opportunistic times. The company receives 7.1% of its ABR from its transshipment facilities, which are shallow bay industrial parks. They can serve both single and multiple tenants with a high number of dock-high doors that can facilitate efficient loading and unloading of goods. TRNO receives approximately 3.7% of its ABR from its flex properties, which are normally less than 10,000 SF and accommodate warehouse, light-industrial, and manufacturing activities and generally include some amount of office space. At the end of 1Q-24, the company reported a same-store portfolio occupancy of 96.2%. Earlier this year, Fitch Ratings upgraded TRNO's long-term issuer default rating from BBB to BBB+ (Stable). The company attempts to maintain financial flexibility and a conservative capital structure. With a long-term debt to capital ratio of 17.52%, the company has a very conservative capital structure, as equity makes up more than 80% of the company's capital. The company has excellent debt metrics, including a net debt to EBITDA of 3.17x and an EBITDA to interest expense of 7.77x. As illustrated below, the company has been improving both its leverage and coverage ratio over the last several years. Back in 2016, the company had a leverage ratio (net debt to EBITDA) of 6.98x and a coverage ratio (EBITDA to interest expense) of 4.40x. Both metrics have steadily improved, with the leverage ratio trending down and the coverage ratio trending up. Terreno Realty has been a growth machine over the last decade, with an average AFFO growth rate of 14.28% since 2014. Over this period, the company's AFFO per share has had positive growth in each year except 2015, when AFFO per share fell by -10%. Analysts expect robust growth over the coming years, with AFFO per share projected to increase by 9% in both 2024 and 2025, and then increase by 17% the following year. Below is a list of the AFFO growth rates Terreno has delivered over the last decade. I excluded the 63% growth rate (2014) from the chart so it could be scaled without too much distortion: Terreno and the rest of the industrial sector should continue to benefit from the growth and increasing adoption of e-commerce. As online retail continues to grow, it will result in more demand for industrial space near urban areas, and TRNO is well-positioned to take advantage of this trend. TRNO is in a fast-growing sector with a long runway for continued growth. The company has excellent debt metrics and is in a solid financial position to support its investments for future growth. The company pays a 2.61% dividend yield and has an average annual dividend growth rate of 10.85%. Dividend coverage has been a bit tight over the last several years, with an AFFO payout ratio exceeding 100% in 2021 & 2022 and a 2023 AFFO payout ratio of 96.59%. However, if analysts' projections are on the mark, the company's AFFO payout ratio will improve to 94.26% in 2025 and then to 87.70% in 2026. Currently, the stock is trading at a P/AFFO of 37.21x, compared to its average AFFO multiple of 40.99x. In addition, I've been a real estate investor for over three decades, so I have seen my fair share of market cycles. In my view, NOW is a great time to buy REITs, while sentiment remains low. The legendary long-term investor Warren Buffett has said that it is better to be fearful when others are greedy and greedy when others are fearful. Value investors like me (and Buffett) tend to be contrarian. And as a real estate investor, I have always lived by these words,

3 Reasons Dividend Investors Should Buy Amazon Before Earnings (NASDAQ:AMZN)

$500 billion in net cash by 2029 and rivers of free cash flow make a dividend likely within a few years, and buybacks and dividend announcements could pop the price 15% to 30% the day they arrive. AMZN's 12-month return potential is 80%, three-year return potential is 112%, five-year return potential is 345%, and six-year return potential is 575%. Earnings season is kicking off with good news that isn't being met with falling prices. But what matters in the long term is that Alphabet's cloud computing sales were strong, topping $10 billion in a quarter for the first time. This bodes well for Amazon (NASDAQ:AMZN), my No. 1 recommendation in deep value hyper-growth blue chips. A name that I've recently bought 150 more shares during the recent sell-off. I plan to set new single-day limits on the day of earnings, just in case Amazon sells off, in alphabet style, on objectively solid results. But let me show you why a high-yield investor passionate about maximizing long-term income is so bullish on Amazon. There are three reasons why high-yield investors might want to buy Amazon ahead of earnings. In Reason Two, I'll explain why Amazon will likely start paying dividends in 2024 or 2025. But even if Amazon never paid a dividend, it's a potentially wonderful addition to a high-yield portfolio. Consider what happens when you combine Amazon with British American (BTI) and Enbridge (ENB), my two favorite Ultra Yield Sleep Well At Night blue chips. An equally weighted bucket of AMZN, BTI and ENB yields 5.4%, is 26% historically undervalued, has 99% dividend safety (sub 2% risk of a cut in a severe recession), and long-term risk management in the top 26% of global companies according to S&P. FactSet's 15% income growth consensus generates 20% long-term income growth consensus and total return potential. Fundamentals justify a rally of 49% in the next year alone, and over the next five years, analysts expect about 22% annualized returns. That's pretty impressive, but look at the historical income growth that combines high yield with hyper-growth generated. Notice how combining 33% Amazon with 66% low volatility BTI and ENB delivered almost the same annual returns but with half the annual volatility. Note 3X thanks cut the peak decline to this diversification. The average five- to 15-year rolling return for this combo is 22% annual returns, which is what the FactSet consensus expects in the future. $1,000 invested in AMZN, ENB and BTI in 1997 started yielding just 1.6%, paying $16 in first-year income. Today, thanks to annual rebalancing, allowing AMZN gains to fund ENB and BTI purchases beyond anything personal savings could have dreamed of, the annual income in 2023 was $22,613 (and on track for $34,000 this year). $1,000 invested in 1997 now pays around $34,000 per year in dividends. And look at the growth rates. 5.4% yield today and potentially 22% long-term income growth means doubling every 3.2 years or a 7.3X dividend increase over the next decade. That is the power of Amazon's hyper-growth combined with ultra-yield dividend aristocrats - a combo that can generate strong yield today and potentially life-changing income growth in the future. Amazon is an incredible business empire, a tech conglomerate spanning: There is another moonshot that Amazon is very excited about. SpaceX is now worth over $200 billion in private equity markets, driven by Starlink. Amazon has its version of Starlink called Kepier. Project Kuiper is Amazon's ambitious initiative to provide global high-speed broadband internet access through a constellation of 3,236 satellites in low Earth orbit (LEO). Here are the key details about Project Kuiper: This is just one example of how Amazon constantly innovates and disrupts industries and sectors. Amazon's incredible growth spending is larger than most governments, estimated to be $150 billion this year and growing to $204 billion by 2029. According to the Congressional Research Service, the US government's average R&D and infrastructure spending (including the CHIPS Act) through 2029 is $296 billion annually or $1.776 trillion. The US government plans to spend $1.8 trillion on growth in six years. Amazon is expected to spend $1.1 trillion. The difference is that in the past 12 months, Amazon's free cash flow return on invested capital was 18.55%. Every $1 spent in the last 12 months generates 18.55 cents in free cash flow this year. If Amazon can maintain that return on investment through 2029, the $1.1 trillion in additional growth spending would increase free cash flow by $197 billion by 2030, to $260 billion. The market has historically valued at 49X free cash flow, or a potential market cap of nearly $13 trillion. Today, Amazon trades at $2 trillion. This year, Amazon is expected to generate over $60 billion in free cash flow. That's over $5 billion monthly or $1.25 billion weekly. (Source: FactSet Research) Amazon's 10% sales growth is expected to translate to 27% growth in free cash flow and 28% growth in net income. (Source: FactSet Research) Amazon's margins growth rate equals the 16% EPS growth rate of the Nasdaq. In other words, from 2023 to 2029, Amazon's free cash flow margin is expected to double, and net margins are expected to almost triple. How is that possible? Simply put, Amazon's high-return investments for the last few years are finally paying dividends. Meanwhile, the company uses AI and robots to streamline costs and increase efficiency. Founded as Kiva Systems in 2003, Amazon acquired the company in 2012 for $775 million and renamed it Amazon Robotics in 2015. Function: Amazon Robotics specializes in mobile robotic fulfillment systems that automate product storage and retrieval in Amazon's warehouses. Technologies: The company has developed various robotic systems, including automated guided vehicles (AGVs) and autonomous mobile robots (AMRs) like Proteus, which can operate safely around human workers. Cloostermans: Cloostermans, a Belgian company specializing in warehouse machinery and robotics, was acquired in 2022. This acquisition aims to enhance Amazon's capabilities in handling heavy pallets, stacking goods, and packaging items for shipment. Canvas Technology: Acquired in 2019, Canvas Technology develops autonomous cart systems using spatial AI to navigate safely around people in dynamic environments. This technology contributes to Amazon's Proteus AMR. Dispatch: Acquired in 2017, Dispatch was a last-mile delivery company. Its technology was utilized to create Amazon Scout, a six-wheeled sidewalk delivery robot. Zoox: Acquired in 2020 for approximately $1.2 billion, Zoox is an autonomous vehicle developer focused on zero-emission autonomous ride-hailing services. Proteus: Amazon's first fully autonomous mobile robot designed to work safely around human workers without being confined to restricted areas. Sequoia and Digit: New robotic solutions to improve workplace safety and efficiency. Sequoia optimizes storage and picking processes, while Digit, developed by Agility Robotics, is a bipedal robot tested for tasks like tote recycling. Elon Musk has said that while robo-taxis might transform Tesla (TSLA) into a $10 trillion company, robotics could turn it into a $25 trillion company. Musk is famous for his bombastic claims and long delays in delivering things like Robo-taxis and self-driving cars (initially promised in 2014). However, a significant labor shortage is coming due to demographics and the skepticism Americans (and many citizens of developed countries) have about immigration. According to Fundstrat, the labor shortage is expected to last through 2047, and AI and robotics will fill much of this gap. By 2030, the global labor shortage will be around 80 million workers. Mr. Lee predicts that technology stocks will rise parabolically due to the global labor shortage. He estimates companies will spend around $3.2 trillion annually on AI technology to address the labor shortage. Amazon Web Services started as an in-house unit designed to organize Amazon's massive customer data and enterprise needs. The company's customers then asked it to let them use it, and today, AWS accounts for most of its profits. If Amazon can perfect humanoid robots, it will not only be a game-changer for its own business and improve working conditions for its human employees but also make Amazon a leader in robotics for both industrial and consumer markets. It's possible that Amazon could even become a DoD contractor, developing robots for military applications. The point is that Amazon, as it perfects its core businesses, invents new solutions to keep growing revenue faster than costs. Those solutions open up new markets, including 3rd party logistics deliveries. Amazon Shipping allows sellers to ship orders from Amazon or other platforms directly to customers without storing their goods in Amazon's warehouses. This service competes with major carriers like FedEx and UPS. Parcel Volume: In 2023, Amazon's logistics network surpassed UPS in parcel volume for the first time. Amazon handled 5.9 billion parcels, capturing 27% of the U.S. parcel delivery market by volume. Global 3PL Market: The global 3PL market, which includes Amazon's logistics services, was valued at approximately $992 billion in 2022 and is projected to reach $1.4 trillion by 2026 And remember that trucking is also a huge opportunity, delivering larger packages than mere parcels. Amazon's Zoox robot taxis are perfecting safe autonomous driving on crowded city streets. Trucks drive on interstates, often in straight lines, for hours. In 2022, the U.S. trucking industry generated approximately $940.8 billion in gross freight revenues, representing 80.7% of the nation's freight bill. The global trucking market was valued at approximately $2.1 trillion in 2022 and is projected to grow to around $3 trillion by 2030. Amazon's third-party logistics business and future opportunities in trucking, robotics, robo-taxis, and healthcare all represent $1 trillion addressable markets. Amazon's cash pile is expected to hit $706 billion and $495 billion in net cash by 2029. And that's factoring in $1.1 trillion in expected growth spending. This is a company that, by 2030 or 2031, is likely to be generating over $200 billion in annual free cash flow. Free cash flow is left over after running the business and investing in future growth. After funding all those things, wages, R&D, growth capex, marketing, taxes, and FCF are left over. Free cash flow can only be spent on acquisitions, debt repayment, buybacks, or dividends. Amazon is facing such a river of free cash flow that it will become politically untenable to avoid dividends indefinitely. A company with $1 trillion in cash (2030 or 2031) is a prime target for politicians to propose an "Amazon wealth tax" to tax that giant pile of money. Analysts don't expect a dividend from Amazon or significant buybacks. However, I expect Amazon to begin returning cash to shareholders by the end of 2024 or sometime in 2025 unless they announce an increase in growth spending in one of these $1 trillion-plus addressable markets. Amazon has plenty of worlds to conquer, and it could theoretically double its growth spending estimates by the end of the decade to around $400 billion. But if it doesn't, a dividend is a mathematical necessity and inevitability. Amazon is 44% historically undervalued and growing so quickly that it has a 79% fundamentally justified upside to fair value within the next 12 months. In other words, imagine that Amazon will be up 79% in a year. That would be 100% justified by fundamentals. It's not a forecast of what will happen, but it's 11X better than the 7% upside potential justified by the S&P. The five-year consensus return potential is almost 30% per year, a Peter Lynch-like return potential. Buffett-like return potential from the ultimate hyper-growth blue-chip hiding in plain sight. The PEG is 1, with an EV/FCF ratio of 30 and a 30% growth rate. If you want to buy long-term growth to combine with high-yield blue chips, there's no fatter pitch today than Amazon in a correction that creates low expectations it's likely to beat. Amazon's incredible success breeds its two largest risks: Regulation and social media-driven bad PR. Amazon is now in so many sectors and industries that it will face much antitrust scrutiny, as seen with its failed attempt to buy iRobot. Amazon's attempt to acquire iRobot, the maker of Roomba vacuum cleaners, has been officially abandoned. The decision came after facing significant regulatory challenges, particularly from the European Union (EU). The European Commission raised concerns that the acquisition could restrict competition in the robot vacuum cleaner market, potentially leading to higher prices, lower quality, and less consumer innovation. Social Media Explains A Lot Of Today's Anger About Everything Amazon "Doesn't Pay Its Fair Share In Taxes" Is An Objective Myth You might have heard about companies making billions in profits, paying no taxes, or even getting tax rebates. Here are the last 11 years of actual Amazon taxes and the consensus estimates through 2029. (Source: FactSet Research Terminal) In the last 11 years, Amazon paid $19 billion in taxes. In the next six years, it's expected to pay $132 billion in taxes. Why is Amazon's tax rate below the 21% corporate rate? Because it legally gets to deduct growth spending immediately. Over time, its tax rate will naturally rise to 21% as its previous growth spending generates recurring profits that will be taxed at 21%. By 2029, its tax bill is expected to be $35 billion, and by 2031, it's likely to become the first company in US history to pay over $50 billion in a single year. By 2035, Amazon may be paying $100+ billion in annual taxes. For context, look at the current sources of federal tax revenue. Thank You, Amazon For Funding So Much Of The Government In 2023, US corporations paid $410 billion in taxes, 9% of federal tax revenues. This year, 0.23% of US Federal taxes are expected to come from Amazon, which is expected to double by 2029. By 2035, Amazon might be responsible for 1% of federal government revenue. Using these figures, we can calculate the estimated federal tax receipts for 2054:$85.2 trillion * 18.7% = $15.9324 trillion. Assuming that Amazon's growth slows to 15% from 2029 to 2054, here's how much taxes Amazon would be paying by 2054. According to the Congressional Budget Office's latest report, Amazon might fund almost as much of the government as all corporate taxes today (9%). The correct response is "Thank you, Amazon," but you can bet the response will be "They aren't paying their fair share in taxes." Amazon employs nearly 2 million people and is one of history's most incredible job creators. It pays more taxes than almost any other company and plans to continue creating more jobs and paying more taxes. That's not to say Amazon's labor practices shouldn't be addressed and that it can't improve its overall operations. However, politicians who want to attack Amazon will always find something to focus on and amplify through social media. The facts about Amazon's net benefits to society are available if you know where to find them. But politicians and social media are designed to whip up fury and outrage by taking legitimate criticisms out of context and sometimes just outright lying about Amazon. For example, some politicians claim Amazon's growth is not due to low prices or convenience but due to monopoly practices. Here's objective proof that Amazon's convenience is superior to that of its peers. No matter how good a company might be or how incredible its benefits to society are, valid criticisms and non-valid out-of-context attacks can always be leveled against it. Just take a look at how many things can and will go wrong for companies, according to S&P. Amazon has a very complex risk profile and has borderline optimal risk management, compared to the No. 1 name for each risk metric in its industry. However, it scores the top 45% of all companies globally, making it a medium-risk company. I don't know what Amazon will do in the short term or after earnings. I can tell you that the best available data today says this is the king of hyper-growth deep value optionality. Amazon has many potential growth avenues besides its core businesses, which are already very profitable and are expected to see margins more than double by 2029. Around $200 billion in free cash flow by 2030 and $500 billion in net cash by 2029 makes a future dividend a mathematical certainty as long as Amazon grows even close to current expectations. When combined with low volatility, high-yield aristocrats like ENB and BTI can earn 5.4% today and potentially grow your income by 22% annually. This is such an incredible opportunity that I have approximately 35% of my life savings invested in this trio, and I sleep very well at night.