Amazon’s greater push into grocery was the reason why major investor Terry Smith opted to sell all of his shares in the online giant last month, he has explained.
Smith, who owns British hedge fund Fundsmith, told investors that he dumped its Amazon shareholding last month due to CEO Andy Jassy’s decision to expand further into grocery, which he said was “potential capital misallocation”.
Writing in his biannual letter to clients, the fund manager said that the ecommerce firm had “already stubbed its toe in this sector” with its acquisition of Whole Foods Market for $13.7bn in 2017.
Smith surprised the market with he sold his shares in the online behemoth last month, just 19 months after buying it, as Fundsmith usually sticks with investments for the long haul.
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It is estimated to have lost about 25% of its investment in Amazon, according to The Times.
Amazon boss Jassy recently revealed earlier this year that it planned to expand its grocery business, Amazon Fresh, and would “go big” on opening stores.
Smith accused Jassy of contradicting the online giant’s four guiding principles that philosophy new projects must be big and capable of generating good returns on capital, had to be in areas of the market where consumers were not already well served, should have a differentiated approach to rivals, and had to be in sectors where Amazon had competence or could acquire it.
The hedge fund owner said that opening more grocery stores “ran counter to all these principles”.
