2. Square, Inc. (NYSE: SQ)
James’ Stake Value: $34,082,000
Percentage of Chris James’ 13F Portfolio: 12.51%
Number of Hedge Fund Holders: 92
Square, Inc. (NYSE: SQ) ranks 2nd on the list of 10 best stocks to buy according to Chris James’ Engine No. 1. The San Francisco-based fintech firm creates a commerce ecosystem that assists businesses with digital inventories, receipts, and sales records. In 2013, Square, Inc. launched the Cash App mobile payment platform to compete with other digital payment services like PayPal Holdings, Inc.’s (NASDAQ: PYPL) Venmo. The fintech firm recently teamed up with Blockstream Mining, a blockchain technology provider, to develop a $5 million open-source, solar-powered bitcoin mining facility. Square, Inc. (NYSE: SQ) acquired about 4,709 bitcoins for $50 million in October 2020 and added another $170 million in February. SQ stock has returned more than 127% to investors in the past twelve months.
The company has a market cap of $103 billion. The company’s first-quarter gross profit grew 79% to $936 million, up from $539 million in the first quarter of 2020. As of June 18, Square, Inc. (NYSE: SQ) shares trade at $237.05 and have a P/E ratio of 331.54. The 52-week price range of SQ is $98.93 – $283.19. On May 10, BMO Capital maintained a Market Perform rating on Square, Inc., with a price target of $269 per share.
Chris James’ Engine No. 1 owns 150,109 shares in the company worth $34 million, representing 12.51% of the fund’s investment portfolio. At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.20 billion in Square, Inc. (NYSE: SQ), up from 89 the preceding quarter worth $8.82 billion.
Like Exxon Mobil Corporation (NYSE: XOM), Deere & Company (NYSE: DE), and Microsoft Corporation (NASDAQ: MSFT), Square, Inc. (NYSE: SQ) is one of the best stocks to buy according to Chris James’ Engine No. 1.
RiverPark Funds, in their Q1 2021 investor letter, mentioned Square, Inc. (NYSE: SQ) and shared their insights on the company. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to passing through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA by more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
