We recently compiled a list of the ARK Invest Stock Portfolio: Top 10 Stock Picks for 2024. In this article, we are going to take a look at where Shopify Inc. (NASDAQ:SHOP) stands against ARK Invest’s top stock picks for 2024.
ARK Investment Management LLC, more commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida, that oversees several actively managed ETFs. It was registered in 2014 by Catherine Wood, who is known for making big bets on disruptive technology like self-driving carse and genomics. The investment fund has around $6.7 billion in assets under management.
READ ALSO: Cathie Wood’s 11 Favorite AI Stocks and Jim Cramer November Portfolio: Top 10 Stocks.
Wood’s flagship fund has faced pressures for the third straight year, with outflows at nearly $1.8 billion during the first six months of 2024, which was close to triple the outflows seen in 2023. Its closing price of $57.85 on November 11 was down 60% from the highs of early 2021. In a letter posted to investors in July, she acknowledged that the fund’s performance was challenged by certain stock picks and the overall macroeconomic environment, but added that ‘our conviction in and commitment to investing in disruptive innovation have not wavered’.
The ARK Invest CEO argued that the fund’s holdings were set to benefit once the Fed rate cuts begin and that she anticipates another period of strong returns, reminiscent of the gains witnessed during the initial days of the pandemic. In August this year, in the hope of buying the dip, Wood piled into several tech stocks whose shares had tumbled in the months prior. Since the announcement of interest rate cuts in September, ARK’s flagship ETF has grown 25%, with a major upward spike in the week running up to and following the presidential elections, which Donald Trump won on November 5.
In a post-election message released to investors, Wood likened the country’s current economic situation to the Reagan era in the early 1980s, when the interest rate and tax cuts resulted in robust economic growth, eventually helping the United States grow out of deficit and into a surplus in the Clinton era.
Cathie Wood predicts a bright future and has stated that Trump’s policies will ‘turbocharge’ the American economy more powerfully than the Reagan Revolution did. She expects the newly elected president to slash regulations and cut tax rates, as he did during his first term.
Trump during his election campaign vowed to reduce the corporate tax rate to 15%, after having already cut the rate from 35% to 21% in his presidency between 2017 and 2021. Having said that, Wood believes that businesses will put investments on hold until the promised cuts are delivered, which means the positive anticipated impact on the economy will be delayed.
Methodology
We scanned the ARK Investment Management portfolio, as of September 30, 2024, and picked the top 10 stocks according to their stake value. The figures were sourced from the Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An enthusiastic customer completing a purchase and receiving an order confirmation via one of the companies online sales channels.
Shopify Inc. (NASDAQ:SHOP)
Stake Value as of Q3 2024: $374,326,277
Shopify Inc. (NYSE:SHOP) is a global commerce company, headquartered in Ottawa, Canada, that provides a commerce platform over the Internet to allow businesses to sell online and in-person.
Its share price has surged 60% since the announcement of second quarter results for Q2 on August 7 as it marked five successive quarters of revenue (excluding logistics) growing 25% or above. The growth has been spurred by the company making AI-enabled tools available to more users in June to attract businesses. This resulted in a 51% increase in merchant acquisition in Q2 and a boost in growth internationally, with half of all merchants who joined the platform during the quarter, coming from outside the core English-speaking markets.
The robust results during the second quarter have been well received by investors. Baron Global Advantage Fund stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q3 2024 investor letter:
Shopify Inc. (NYSE:SHOP) is a cloud-based software provider for multi-channel commerce. Shares rose 21.3% after reporting strong financial results with revenue growth of 25% year-on-year, accelerating from the prior quarter. Shopify’s operating margins also outperformed, at 14.6%, or nearly 3% better than expected, alleviating investor concerns over an upcoming investment cycle. While the company continues gaining share in its core business, we are increasingly seeing data points that point to a successful expansion to new opportunities including international, B2B, and offline. Despite volatility in the pace of reinvestments and margin expansion, we remain shareholders due to Shopify’s strong competitive positioning, innovative culture, and long runway for growth, as it still holds less than a 2% share of the global commerce market.
Shopify Inc. (NYSE:SHOP) has a diverse business model spanning many verticals and geographies, including direct-to-consumer and B2B sellers, because of which the company continues to attract high-profile and high-volume merchants. This reiterates Shopify’s growing recognition as a premier commerce platform. It also has a thriving partner ecosystem, further bolstered through a new partnership with Oracle, which was agreed upon in June to deliver more meaningful customer experiences by integrating Oracle Unity Customer Data Platform (CDP) with Shopify’s commerce platform.
Wall Street analysts maintain a consensus Buy rating on SHOP. Hedge fund sentiment also remains strong. As of Q2 2024, 56 hedge funds tracked by Insider Monkey held investments in the company. Shopify Inc. (NYSE:SHOP) is one of the top picks from the ARK Invest stock portfolio, representing 3.42% of its holdings.
Overall SHOP ranks 8th among the ARK Invest’s top Stock Picks for 2024. While we acknowledge the potential of SHOP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.