In the third quarter, two prominent hedge fund managers decided to sell their Amazon shares and instead invest in a Spot Bitcoin ETF.
Both hedge fund billionaires made significant shifts in their portfolios. They sold shares of Amazon (AMZN +0.40%) and increased their stakes in the iShares Bitcoin Trust (IBIT +0.27%), an ETF managed by BlackRock that tracks the spot price of Bitcoin (BTC 1.88%).
- Philippe Lafon of Corchu Management sold 1.4 million shares of Amazon, decreasing his stake by 14%. In contrast, he acquired 76,100 shares of the iShares Bitcoin Trust, thereby more than doubling his investment.
- Steven Schoenfeld from Schoenfeld Strategic Advisors reduced his Amazon shares by 72% after selling 253,700 shares. He opted to add 1.1 million shares of the iShares Bitcoin Trust, which increased his holding by 20%.
This move stands out since Lafon and Schoenfeld have outperformed the S&P 500 (^GSPC 0.06%) over the last three years. Their returns grew by 94 and 22 percentage points, respectively. Thus, these hedge fund managers may provide valuable insights for other investors.
Some analysts on Wall Street are optimistic about Bitcoin’s future value. For instance, Tom Lee from Fundstrat Global Advisors predicts that Bitcoin could reach a market cap of $3 trillion over time, reflecting an increase of over 3,000% from its current level of $95,000. Similarly, Michael Saylor suggests that the price might hit $13 million by 2045, which would mean an increase of more than 13,500%.
Here are key insights for investors.
Amazon: Stocks sold by Lafon and Schoenfeld
Amazon maintains a strong foothold in e-commerce, digital advertising, and cloud computing. The company has leveraged its strengths by integrating artificial intelligence (AI) across these sectors to enhance revenue and improve profit margins.
In the e-commerce realm, Amazon has launched numerous generative AI applications aimed at boosting operational efficiency. These innovations help automate customer service, enhance demand forecasting, fine-tune inventory distribution, and expedite last-mile deliveries. Notably, they have developed an AI model named DeepFleet that enhances the speed of robots in warehouses.
Regarding cloud computing, Amazon Web Services (AWS) has rolled out new foundational models and services like Bedrock for creating generative AI applications. AWS has also introduced AI agents for coding, security, and incident management, as well as a business intelligence platform called Quick Suite, which employs generative AI for data analysis and workflow automation.
Wall Street forecasts a 19% revenue growth for Amazon annually over the next three years, which seems plausible given its competitive strength across these significant markets. This indicates Amazon is well-situated to capitalize on the AI trend. The stock currently trades at a P/E ratio of 34, and many analysts believe it to be undervalued. A median target price of $300 per share suggests a 25% increase from its current value of $239.
So why did Lafon and Schoenfeld offload Amazon shares? They might have decided to take profits or perhaps identified better opportunities elsewhere. Regardless of the reasoning, it’s essential not to assume they’ve lost faith in the company. Both still hold shares, with Amazon being LaFont’s fifth-largest investment. Personally, I think Amazon is worth considering at its current price.
iShares Bitcoin Trust: BlackRock ETF bought by Lafon and Schoenfeld
Bitcoin has seen a 25% decline from its all-time high, primarily due to macroeconomic uncertainties and geopolitical tensions that are steering investors away from riskier assets. Factors such as profit-taking and liquidation of leveraged positions have also played a role. However, the fundamental investment case remains unchanged.
The demand for Bitcoin is likely to persist, especially with the recent introduction of spot Bitcoin ETFs, like the iShares Bitcoin Trust, which have made it simpler for both retail and institutional investors to gain exposure to cryptocurrencies. As the leading and most liquid cryptocurrency, Bitcoin is often the first digital asset investors turn to.
Over the last year, the amount of Bitcoin held by governmental entities has surged by 25%, and it has risen by 55% among public and private companies. Meanwhile, the number of large asset managers required to file Form 13F with a stake in the iShares Bitcoin Trust has more than doubled, with the shares they reported owning increasing over four times.
Looking at the broader picture, Bitcoin is known for its volatility. It’s not unusual for cryptocurrencies to trade significantly below their historical highs. While this can be challenging for investors, history indicates that Bitcoin eventually rebounds to set new records.
Currently, cryptocurrencies appear to be undervalued. Analysts often compare the market value of Bitcoin to its thermocap, which represents the total value of mining rewards. The current ratio of Bitcoin’s market value to thermocap stands at 20x, significantly lower than the historical average of 50x, according to Morgan Stanley.
Thus, investors willing to accept risk and with a long-term outlook should think about incorporating Bitcoin into their portfolios, and the iShares Bitcoin ETF offers a convenient and affordable way to achieve this.
