Fresh off a record Prime Day where Amazon.com Inc. (AMZN) smashed all sorts of records in sales and subscriptions, you'd think that investor Doug Kass would be enthusiastic about Amazon's stock. Instead, the founder and president of Seabreeze Partners Management says he's shorting Amazon and warns other investors not to buy.

Antitrust Speculation

Amazon's shares jumped about 33 percent this year by late June to more than $1,000, pulled back, and then recovered to the $1,000 level on Thursday. Kass, who writes for The Street, has been expressing his bearish outlook over a series of notes titled 'Peak Amazon.' 

His latest column comes as Amazon continues to disrupt a multitude of industries through expansion and acquisitions, which Kass says will soon become an issue for lawmakers in D.C. "I am shorting Amazon today because I have learned that there are currently early discussions and due diligence being considered in the legislative chambers in Washington, D.C., with regard to possible antitrust opposition to Amazon's business practices, pricing strategy and expansion announcements already made (as well as being aimed at expansion strategies being considered in the future)," Kass said in a note Thursday. 

Amazon's shares were down less than 1 percent in daily trading, indicating that investors see no imminent antitrust threat - at least right now. IBM and Microsoft Corp., two other giants, were once the target of protracted, though unsuccessful, federal antitrust cases.

High-Profile Target

But the company's dominance and its high-profile founder make the company a prime target. Amazon founder Jeff Bezos, of course, is the owner of The Washington Post, which has regularly published critical stories about President Donald Trump and his administration's alleged ties to Russian government officials and the U.S. election. Trump has been openly critical of the Post and of Bezos.

As the retail sector slowly dies, antitrust concerns are nothing new for Amazon. However, its recent $14 billion acquisition of Whole Foods Market Inc. (WFM) has put Amazon's back under the microscope. In the aftermath of the deal, the food market retail stocks were decimated. Shares in Cincinnati-based Kroger Co (KR) have fallen 25 percent since the acquisition, and Costco Corp (COST) is lower by 15 percent.

10 Percent Downside Risk, or More

If the U.S. takes antitrust actions against Amazon, Kass sees big trouble for its investors. "If I am correct, word of this could lower Amazon's shares by 10% overnight. And if expansion or pricing prohibitions are attacked for antitrust reasons (or for other reasons), a far more severe market impact is possible," Kass said. 

While retail stocks have been on a steady decline, Kass sees value in owning retail stocks at these current levels. Kass currently owns shares of high-end retailer Nordstrom Inc. (See also: These Retail ETFs Could Be Well Timed)

Kass's bearish outlook for Amazon is part of a his skeptical view of equity prices, with the Federal Reserve tightening and valuations at record highs.

So - it's not just Amazon's stock that concerns Kass. (See also: Goldman, Citigroup Face Rocky Earnings Season)

 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.