Sleuthing out RiskHedge’s “Amazon Killer Tollbooth”

What's Stephen McBride calling "Amazon's Kryptonite" in ads for Disruption Investor?

By Travis Johnson, Stock Gumshoe, November 19, 2020

This article was originally published on June 16, 2020. The ad is circulating again now, and seems unchanged from when we first covered it, so we’re re-posting it here to help answer reader questions. What follows has not been updated or revised since June, as of today the stock has risen in value by about 25% in the interim.

The pitch is for Disruption Investor ($99/yr), Stephen McBride’s “entry level” newsletter for RiskHedge that seeks out, well, disruptive companies that can generate outsize returns… and it’s a technology-focused newsletter for the most part, so I imagine the picks have probably done really well over the last year or two as the “cloud” revolution has disrupted the world of software and driven SaaS companies dramatically higher.

This particular stock is pitched as an “Amazon Killer,” here’s a little taste from the tease:

“Most folks don’t know this, but Amazon owes a lot of its success to an obscure tax ruling from 1992 called Quill.

“Quill forbade governments from taxing online transactions in most cases.

“Keep in mind, these were the early days of the internet. Amazon didn’t exist yet. Lawmakers were clueless about the coming explosion in online shopping.

“But Amazon exploited this outdated ruling to pay ZERO sales taxes!

“Forbes called it an unbelievably unfair tax advantage.”

But now that unfair tax advantage has disappeared, thanks to a Supreme Court decision…

“… South Dakota vs. Wayfair.

“Tax experts call it the case of the millennium.

“Because effective immediately…

“It closes the internet tax loophole…

“And opens a new opportunity to make quick 200% gains… and overall gains of 1,000% or more… in the Amazon Killer tollbooth stock.”

That creates a sense of urgency in our minds, right? We think this decision just came down and this “tollbooth” stock that’s about to kill Amazon is going to surge right now, right?

Well, that may or may not be true… but the news itself is pretty old now. You’ve probably noticed that you’re being charged sales tax online much more often these days than in the past, and that’s because that Supreme Court decision came down almost exactly two years ago, getting rid of much of the “tax shelter” that internet retailers (and before them, catalog retailers) enjoyed.

So that’s where we see the problem emerge — it’s not just Amazon and Wayfair that have to pay local state sales taxes, which differ in every state, it’s also much smaller retailers who have to navigate these myriad rules and regulations and file the proper forms and make the proper payments to different states and municipalities.

Which leads right to the stock McBride is teasing, a company that’s trying to solve this problem for retailers. Here’s a bit more from the tease:

“… authorities have effectively hired the Amazon Killer to create and run this new nationwide system.

“Using its unique, patent-protected technology, it’s created a new internet tollbooth that all online transactions can pass through.

“With the blessing of US tax authorities, 10 billion transactions already pass through its tollbooth.

“It gets paid a small cut for each one.

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“And it’s adding millions more transactions a day!

“Which is why the Amazon Killer’s revenue growth has accelerated for six straight quarters…”

Accelerating revenue growth, when your revenue doesn’t just keep rising but continues to rise at a faster rate, is a huge indicator for growth-focused investors… and it doesn’t come along very often for larger companies, so that piques my interest. What else?

“Shopify… Etsy… Wix…

“They ALL use the Amazon Killer’s tollbooth.

“So do hundreds of big businesses like The New York Times, Pinterest, Converse, 3M, Adidas, and Reebok.