The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Shopify Inc (NYSE:SHOP) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Shopify Inc (NYSE:SHOP) has seen an increase in activity from the world’s largest hedge funds lately. Shopify Inc (NYSE:SHOP) was in 57 hedge funds’ portfolios at the end of June. The all time high for this statistics is 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SHOP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are numerous signals market participants use to assess publicly traded companies. A duo of the less utilized signals are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outperform the market by a superb margin (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a look at the key hedge fund action regarding Shopify Inc (NYSE:SHOP).
Hedge fund activity in Shopify Inc (NYSE:SHOP)
At second quarter’s end, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SHOP over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lone Pine Capital was the largest shareholder of Shopify Inc (NYSE:SHOP), with a stake worth $1588.7 million reported as of the end of September. Trailing Lone Pine Capital was Citadel Investment Group, which amassed a stake valued at $914.7 million. SCGE Management, Whale Rock Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Strategy Capital allocated the biggest weight to Shopify Inc (NYSE:SHOP), around 32.35% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, dishing out 15.47 percent of its 13F equity portfolio to SHOP.
Consequently, key hedge funds were breaking ground themselves. Tairen Capital, managed by Larry Chen and Terry Zhang, initiated the most outsized position in Shopify Inc (NYSE:SHOP). Tairen Capital had $99.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $64.3 million position during the quarter. The other funds with brand new SHOP positions are Charles Clough’s Clough Capital Partners, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Steve Cohen’s Point72 Asset Management.
Let’s check out hedge fund activity in other stocks similar to Shopify Inc (NYSE:SHOP). These stocks are Linde plc (NYSE:LIN), Philip Morris International Inc. (NYSE:PM), International Business Machines Corp. (NYSE:IBM), Citigroup Inc. (NYSE:C), Charter Communications, Inc. (NASDAQ:CHTR), Wells Fargo & Company (NYSE:WFC), and BHP Group (NYSE:BBL). All of these stocks’ market caps resemble SHOP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LIN | 52 | 3643095 | -1 |
| PM | 53 | 2574980 | 5 |
| IBM | 46 | 918051 | 5 |
| C | 96 | 6229205 | 10 |
| CHTR | 96 | 11227561 | -8 |
| WFC | 86 | 10344809 | 10 |
| BBL | 22 | 919411 | 1 |
| Average | 64.4 | 5122445 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 64.4 hedge funds with bullish positions and the average amount invested in these stocks was $5122 million. That figure was $5916 million in SHOP’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 22 bullish hedge fund positions. Shopify Inc (NYSE:SHOP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SHOP is 63.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th and surpassed the market by 20.6 percentage points. Unfortunately SHOP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SHOP investors were disappointed as the stock returned 5.3% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
