Renowned British fund manager, Terry Smith, has made headlines after selling his fund’s Amazon.com Inc. stock due to the company’s foray into the grocery sector. Smith, the mastermind behind the highly successful Fundsmith Equity fund boasting an impressive annualized return of 15.6% since its inception, revealed this decision in his annual letter to shareholders. The fund had initially purchased Amazon shares in July 2021.
Smith expressed disappointment in Chief Executive Andy Jassy, who assumed the CEO role in July 2021. According to Smith, Jassy has failed to uphold his investment principles, which revolve around targeting underserved market segments, adopting a unique approach, and exhibiting strong execution capabilities. Smith remarked, “It is always easier to talk the talk than it is to walk the walk, and the CEO’s proclamation that he wanted Amazon to expand its presence in the grocery retail industry contradicted all these principles. In our opinion, grocery retail lacks the traits essential to our investment strategy, and Amazon’s previous stumble in this sector with the Whole Foods acquisition echoes our concerns.”
Back in 2017, Amazon made headlines with its $13.7 billion acquisition of Whole Foods. In his annual shareholder letter released in April, Jassy highlighted the potential opportunities within the grocery space by stating, “Over the past year, we’ve continued to invest in the business while also making changes to drive better profitability. Whole Foods is on an encouraging path, but to have a larger impact on physical grocery, we must find a mass grocery format that we believe is worth expanding broadly. Amazon Fresh is the brand we’ve been experimenting with for a few years, and we’re working hard to identify and build the right mass grocery format for Amazon scale. Grocery presents a significant growth opportunity for Amazon.”
Despite Smith’s decision to divest from Amazon, the company’s stock price (AMZN, -2.04%) has soared by 51% this year, positioning it firmly among the “Magnificent Seven” stocks driving the broader market’s upward trend.