If I Could Only Buy and Hold a Single Stock, This Would Be It

Key Points

• Amazon and its management team are experienced with trying new things.

• Every success or failure, however, is a learning experience.

• History has shown that companies that foster innovation and don't punish failure tend to thrive, while those that fear it or are unwilling to adapt often struggle.

• 10 stocks we like better than Amazon ›

Investors can own as many individual stocks as they want and can afford. Sometimes, though, hypothetically imagining that you're limited to just one can be enlightening. That thought experiment forces you to rate and rank the strengths and flaws of every investment candidate on your radar. This process can -- in a good way -- really help you narrow down your list to a small handful of top options.

Or one.

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And I know exactly which one that would be for me. If I could only buy and hold a single stock, it would be Amazon (NASDAQ: AMZN). Here's why.

Image source: Getty Images.

What Amazon really is

You very likely already know the company. Amazon is, of course, the king of North American e-commerce, accounting for nearly 40% of the market's total revenue, according to research by Digital Commerce 360. It's doing alright overseas, too. Then there's its cloud computing arm, Amazon Web Services, which provides a relatively small portion of its revenue, but is responsible for nearly 60% of the company's operating profits.

However, these numbers still don't even come close to telling the whole story. Amazon also manages an on-demand video platform (Prime), owns grocery store chain Whole Foods Markets, does delivery work for other online retailers, and sells prescription pharmaceuticals through its Pillpack arm. It also monetizes its online mall by allowing its sellers to pay for more prominent promotion, creating an advertising business that generated $15.7 billion in revenue last quarter alone, by the way. On top of all that, it owns websites IMDb.com and Twitch, and is the parent to camera-doorbell brand Ring.

There's a method to the madness behind these seemingly disparate lines of business, though. While most companies focus on doing one or two things extremely well, Amazon has orchestrated several different lines of business, each of which fuels another, and each of which is fueled by another. The result is a mesh of different profit centers that ultimately funnels consumers and corporations into Amazon's ecosystem.

Yes, it's complicated, but yes, Amazon can handle it.

That's not quite the only reason I'd be willing to make Amazon my one and only stock holding, though.

Jeff Bezos started it

Companies founded or grown by bigger-than-life leaders can make for potentially problematic investments. It's just difficult to determine if it's the company that's something special, or the person. If it's the person, what happens when that individual is no longer at the helm?

Case in point: General Electric was never quite the same after Jack Welch stepped down as CEO in 2001. Steve Jobs was also nearly synonymous with Apple until he passed the torch to Tim Cook in 2011. While Cook has been a solid successor, he's arguably not quite as captivating or magical as his predecessor. Neither is Apple under him.

Still, most high-profile chief executives -- and founders in particular -- manage to leave their mark on their company's culture. That imprint remains part of the organization's ethos even in their absence. While current Amazon CEO Andy Jassy is no Jeff Bezos, for instance, Bezos' philosophy remains.

Take, for example, the company's willingness to experiment. As Bezos noted in his 2016 letter to Amazon's shareholders, "Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there."

That does not describe Amazon, though. Bezos made a point of fostering a "fail fast, fail often" work culture that did end up producing some failures, such as the Fire smartphone. Such experiments, however, also led to the creation of Amazon Web Services and Amazon Prime, the latter of which has been a massive growth driver for the company.

Now Jassy is blending his own mindset with Bezos'. As he said while discussing the company's core 16 leadership principles, "At Amazon, you are not just empowered to speak up if you think we're doing something wrong for customers of the business. You're expected to do so, regardless of level."

It works. Amazon is an even bigger company now than it was when Bezos stepped down as CEO.

Don't underestimate the power of a willingness to innovate

Many investors will point out that a healthy corporate culture doesn't pay the bills. I agree. At some point, to thrive, every company must sell its products or services profitably. Amazon is no exception.

History has shown, however, that companies with corporate cultures that encourage innovation and don't punish failure tend to prosper while organizations that are cautiously and defensively managed often struggle.

Compare Alphabet today to post-Welch GE, for instance. The manufacturing conglomerate ultimately hit a wall after years of obscuring the true depth of its insurance arm's liabilities from a management team that might have been able to fix them (although the company didn't exactly embrace the advent of the digital age either). Or compare Blockbuster to Netflix. The once-giant video rental chain infamously had a chance to buy the latter for a mere $50 million back in 2000. At the time, Blockbuster was doing on the order of $4 billion worth of business per year, and could have easily purchased Netflix, if only to take its budding competitor out of the market. But it didn't.

In its defense, Blockbuster's decision at the time wasn't quite the obvious misstep it seems in retrospect. Remember, Netflix wasn't yet streaming then. It was still only renting DVDs by mail. Given Blockbuster's dominance of the brick-and-mortar movie rental business back in 2000, the logistics behind this new kind of movie rental business model understandably didn't make sense to the now-defunct company.

In many regards, though, that story underscores the underlying theme here in an even more effective way. Even if Blockbuster didn't want Netflix, Blockbuster certainly could have leveraged its own powerful brand to become a streaming powerhouse. Likewise, if not Netflix, some other enterprising outfit would have eventually launched the streaming-video business. Netflix was simply the outfit that tried the idea out first, knowing when it did so that it might end in failure.

So for my money, I'll bet on a company that is experienced with managing experiments' successes as well as failures -- and learning from both -- to evolve and thrive.

That said, it certainly doesn't hurt the bullish argument that Amazon has the financial flexibility to experiment. With its $2.5 trillion market cap, it does more than $600 billion worth of business per year, and turns about $60 billion of that into net income. Meanwhile, it's only sitting on a little over $80 billion in long-term debt. It's much easier not to fear failure when you can actually afford to take big swings, miss, and try again.

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James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Netflix. The Motley Fool recommends GE Aerospace. The Motley Fool has a disclosure policy.