In this article you are going to find out whether hedge funds think Shopify Inc (NYSE:SHOP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is SHOP a good stock to buy? Shopify Inc (NYSE:SHOP) was in 73 hedge funds’ portfolios at the end of September. The all time high for this statistic is 91. SHOP shareholders have witnessed a decrease in hedge fund sentiment lately. There were 85 hedge funds in our database with SHOP holdings at the end of June. Our calculations also showed that SHOP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Shopify Inc (NYSE:SHOP).
Charles Clough of Clough Capital Partners
Do Hedge Funds Think SHOP Is A Good Stock To Buy Now?
At the end of September, a total of 73 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 81 hedge funds with a bullish position in SHOP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Lone Pine Capital held the most valuable stake in Shopify Inc (NYSE:SHOP), which was worth $1938.9 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $1525.4 million worth of shares. ARK Investment Management, SCGE Management, and Tiger Global Management LLC 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 23.83% of its 13F portfolio. Himension Capital is also relatively very bullish on the stock, designating 14.02 percent of its 13F equity portfolio to SHOP.
Since Shopify Inc (NYSE:SHOP) has faced declining sentiment from the smart money, we can see that there was a specific group of money managers that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Andreas Halvorsen’s Viking Global dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $152.6 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also dumped its stock, about $146.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 12 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Shopify Inc (NYSE:SHOP). We will take a look at Medtronic plc (NYSE:MDT), T-Mobile US, Inc. (NASDAQ:TMUS), SAP SE (NYSE:SAP), United Parcel Service, Inc. (NYSE:UPS), Moderna, Inc. (NASDAQ:MRNA), NextEra Energy, Inc. (NYSE:NEE), and Linde plc (NYSE:LIN). This group of stocks’ market valuations are similar to SHOP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDT | 62 | 2278950 | -6 |
| TMUS | 89 | 6928776 | -11 |
| SAP | 15 | 1529829 | -2 |
| UPS | 42 | 1266269 | -10 |
| MRNA | 49 | 7315014 | 12 |
| NEE | 53 | 2374429 | -6 |
| LIN | 46 | 4769164 | -9 |
| Average | 50.9 | 3780347 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.9 hedge funds with bullish positions and the average amount invested in these stocks was $3780 million. That figure was $11451 million in SHOP’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 15 bullish hedge fund positions. Shopify Inc (NYSE:SHOP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SHOP is 56.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on SHOP as the stock returned 12.2% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
