Amazon (AMZN) Gets Beat by Overstock (OSTK) in Net Earnings

September 9, 2013

Its not unusual that a CEO of a company will cheer his earnings, especially when he beats his competitors in profitability. Dr. Patrick Michael Byrne is no exception. As the CEO of Overstock (OSTK), he boasts in a recent interview that “a well known hedge fund manager” declared that the CEO has become “the most hated man I’ve ever known in my entire life.”

Dr. Byrne goes on to declare in this interview that the profitability of Overstock should create a valuation greater than Amazon, the growth-stock-investor favorite that lost over a $100 million in the last 12 months. Dr. Byrne notes: “But they were trading at about 800 times our valuation, I think, so that was bizarre. But according to value investing, what really matters is not absolute dollars earned; it’s dollars of earning per share. And I suspect we are going to make more money per share this year than Amazon is, and I’m not sure that it’s not a reasonable goal for us to keep our per-share earnings higher than Amazon… It is going to be a great test of value investing.”


Dr. Byrne does not recommend Overstock for retail investors as he believe hedge funds increase the volatility of the stock beyond the tolerance of individual investors:
“…We are a battleground stock. That means there is a lot of manipulation in our stock. There are some hedge funds on one side who picked our stock as a good stock to target and manipulate. A bunch of really bad guys got involved in our stock, including some people who are now in the headlines with handcuffs on them, so it’s a dangerous stock. “

As the development of Overstocks’ business overtakes the reputation of its controversial CEO, there is the possibility that value investors will come to embrace the stock. Until that time, investors can only watch from the sidelines as the company outperforms Amazon on profitability metrics.