OUCH. It’s been a brutal year for many in the capital markets and certainly for Amazon.com shareholders. As of this writing, our shares are down more than 80 percent from when I wrote you last year.

Jeff Bezos wrote this to start his annual shareholder letter in the year 2000. But he might have written it today. Amazon stock reached an all time high of $5.33 before falling to $0.298.

Bezos continued:

So, if the company is better positioned today than it was a year ago, why is the stock price so much lower than it was a year ago? As the famed investor Benjamin Graham said, “In the short term, the stock market is a voting machine; in the long term, it’s a weighing machine.” Clearly there was a lot of voting going on in the boom year of ’99—and much less weighing. We’re a company that wants to be weighed, and over time, we will be—over the long term, all companies are. In the meantime, we have our heads down working to build a heavier and heavier company.

Startups feel this way today. Company performance exceeds employee expectations, yet the market values the company less than two quarters ago.
Amazon stood fast to their principles throughout. Just as important, though, Amazon managed their finances well.

Year
Growth
Net Income, $m
Cash & ST Equivalents, $m

2000
68%
-1,411
822

2001
13%
-567
540

2002
26%
-149
738

2003
34%
35
1102

2004
32%
588
1303

Before the dotcom crash, Amazon grew at 68% and lost -$1.4b in net income. Two years later, the company would re-accelerate growth from 13% to 26%, and again to 34%, while driving to profitability and increasing their cash position from $540m to $738m. A remarkable accomplishment in the most unforgiving capital markets environment the company had seen.

All this took patience: Amazon’s share price exceeded the dot-com high Oct 23, 2009, a decade later. Ten years after that, the company’s value had compounded 20x. Of late, the share price again has fallen 40%.
Bezo’s advice 22 years ago holds true today: patience and prudence throughout booms and busts.
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