How Amazon’s record share price shows Australians what shares to buy

Shares in North American online retail phenomenon hit another record high overnight of US$726 per share to give the company a market value around US$344 billion.

That means it’s now bigger than Facebook Inc. and has almost the same market value as Warren Buffett’s investment conglomerate Berkshire Hathaway. Amazon is now reportedly the sixth most valuable company in the US with only the likes of Google owner Alphabet Inc, Apple and Microsoft ahead of it.

Amazon is an excellent example of the rapid growth of the digital economy with its shares being the number one performer from the US S&P/500 Index in 2015 and returning nearly 2,000% to investors since 2006. Moreover, some investors expect that it could go on to be the first $1 trillion company in the world.

If it does keep growing quickly investors in traditional bricks-and-mortar retailers in Australia like Myer Holdings Ltd (ASX: MYR) or (now privately held) David Jones would be well served to stay cognisant of the online risks coming from overseas retailers. Other online-only overseas retailers growing rapidly in the digital space include Chinese giant Alibaba, US-based and UK-based

Another one of the top-10 performing shares in 2015 among the flagship  S&P/500 Index was online travel booking giant Expedia Inc. The US$16 billion travel group delivered a share price rise of around 47% in 2015, which was mainly driven by bookings growth that allowed it to outperform almost every other large-cap company it competes against.

The online-only travel agent is up 325% over the past five years and its US and global success is another reason why some commentators remain bearish on the outlook for global bricks-and-mortar operators like Flight Centre Travel Group Ltd (ASX: FLT).

Elsewhere the S&P 500 Index’s best performing stock in 2015 was online broadcaster Netflix, which returned around 147% in 2015 and has climbed more than 700% since 2012! Needless to say its popularity amongst the youth market in particular could spell long-term trouble for Australia’s free-to-air broadcasters like Ten Network Holdings Limited (ASX: TEN) and Nine Entertainment Co Holdings Ltd (ASX: NEC). They are down 55% and 43% respectively over just the past year.

Evidently the growth of the digital economy is one trend smart investors should not miss out on.

For ASX investors probably my favourite stock in this space is property website operator REA Group Limited (ASX: REA), with global growth horizons and a return on equity of 36% the shares look a buy at $55.10. Others with long-term potential and attractive economics in this space include SEEK Limited (ASX: SEK) and Ltd (ASX: CAR).

While investors prepared to take on more risk in search of the digital hit of tomorrow could consider online jobs portal Freelancer Ltd (ASX: FLN). Its shares sell for $1.52 and it remains an on a reasonable valuation relative to its outlook.

Why retirees and income seekers LOVE these 5 ASX stocks

Discover The Motley Fool's top 5 ASX dividend stock ideas for 2016 to get you started building a more diversified income portfolio that is paying you back! Click here to learn more.

The report is free! No credit card required.

Motley Fool contributor Tom Richardson owns shares in REA Group.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.