1. Shopify Inc. (NYSE:SHOP)
Lyle’s Stake Value: $1,306,116,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 12.23%
Number of Hedge Fund Holders: 85
Shopify is a Canadian e-commerce platform and subscription-based software that allows users to create their online stores. It was founded in 2006 and ranks first on the list of 10 e-commerce and tech stocks to buy now according to Christopher Lyle’s SCGE Management.
Headquartered in Ottawa, Canada, the company has a market capitalization of $185.59 billion. With 894,000 shares, SCGE management has a stake worth $1.3 billion in Shopify Inc. (NYSE: SHOP).
Based on the data of the 873 funds tracked by Insider Monkey, the number of hedge fund positions in Shopify decreased from 91 in the first quarter of 2021 to 85 in the second quarter. Aubrey Capital Management is the largest stakeholder in Shopify Inc. (NYSE: SHOP) with shares worth over $8 billion. SCGE management holds the eighth spot with a 13F portfolio weightage of about 12.23%. Shopify beat analysts’ estimated EPS by $1.28 for the second quarter of 2021.
Worm Capital mentioned Shopify Inc. (NYSE: SHOP) in its Q2 2021 investor letter. Here’s what the fund said:
“In particular, the very nature of travel is changing: Longer stays, more flexible remote work policies, and so on. As its marketplace matures, we see significant similarities to our position in Shopify: An international focus led by managers who understand that, in land-grab environment, focusing on its unique value proposition for its sellers—i.e. keep costs low, improve the platform with additional features, etc.—takes precedent over short-term earnings. In other words, we like businesses that play the long game. Unlike Airbnb, Shopify drove positive attribution this past quarter. Still, we think this opportunity is still vastly undervalued over the long-term.
Last year, in the Q2 2020 Investor Letter, we wrote a bit about the similarities and differences between AMZN and SHOP, but concluded they “both display winner-take-most dynamics in their respective domains.” We still believe that thesis is true: E-commerce is still, relatively speaking, in its early days. Despite the pandemic push, e-commerce retail still represents less than 15% of overall retail sales, per latest Fed data.
What that means, in practice, is that the opportunity for low-end disruption (i.e. create a scalable backbone for sellers to launch e-commerce business cheaply) is an enormous, underappreciated opportunity to create new economic value. Shopify is growing its GMV at high velocity (114% YoY in its most recent quarter to over $37 billion) but it’s a tricky business to value—which is good. We like tricky valuations. Our research process looks out several years into the future, which is really the only way to value a business properly—especially in a disruptive environment. (Trying to look at potential short-term earnings or even a simple price-to-sales multiple is not a good way to model out valuations on Shopify.) When thinking about a position like Shopify, we view them as generational company—much like AMZN—that is building the global infrastructure to enable small and medium-sized business to transact online, and, most importantly, keep their unique identity and branding.
Where AMZN optimizes for efficiency, SHOP optimizes for experience. The scale of this opportunity is vast, and Shopify’s reach is wide. The focus—much like ABNB—is keeping costs low for sellers, attract new vendors, improving the ecosystem for merchants. “The rebels are winning,” Shopify president Harley Finkelstein said recently (in a quote we liked so much we made it the title of this letter). “We are betting on a different vision of the future of commerce. We are making it possible for every business to present their brand in their own unique way. A stark contrast to selling on a centralized marketplace.”
You can also take a peek at the 10 Best Stocks to Buy According to Billionaire Daniel Sundheim and 10 Best Stocks to Buy According to John Paulson
