Baillie Gifford, a large-scale investment management firm in the UK, published its “Long Term Global Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 13.59% was recorded by the fund for the second quarter of 2021, compared to the 7.53% return of its MSCI ACWI benchmark. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Baillie Gifford, the fund mentioned Shopify Inc. (NYSE: SHOP), and discussed its stance on the firm. Shopify Inc. is an Ottawa, Canada-based e-commerce company, that currently has a $187.6 billion market capitalization. SHOP delivered a 32.51% return since the beginning of the year, extending its 12-month returns to 46.48%. The stock closed at $1,499.93 per share on July 30, 2021.
Here is what Baillie Gifford has to say about Shopify Inc. in its Q2 2021 investor letter:
“As many countries enjoy a relaxation of Covid restrictions, Mr Market is focussed on short-term beneficiaries of ‘the pleasure after the plague’. There are
interesting parallels with the Roaring 20s here, but to our minds, they extend beyond post-pandemic hedonism. Much of the new wealth created in the 1920s was patchily distributed and accompanied by a pervasive sense that the older generation had let down younger people. In 1920, John F. Carter, an irate 23-year-old wrote “the older generation had certainly pretty well ruined this world before passing it on to us. We have been forced to live in an atmosphere of ‘tomorrow we die,’ and so, naturally, we drank and were merry.”These words could just have easily come from a disenfranchised youngster today. The pandemic has exposed and accentuated pre-existing inequalities, leading those on the wrong side of the bargain to seek redress. In an LTGG context, we need to remain alert to these shifts – and to appreciate where they may act as tailwinds for the portfolio, because to our mind, a number of the holdings are acting as democratising forces. Shopify is a good case in point. The platform’s growth – comfortably in excess of 100 per cent per annum – is largely a function of its ability to level the playing field by lowering the costs of starting and scaling a business, reducing the barriers to entrepreneurship by means of affordable tools and online infrastructure. Shopify handles security, inventory management, shipping, electronic payment processing and a slew of other services that many small business owners may not be able to deal with themselves. Meanwhile, Shopify Capital offers short-term business funding in the form of merchant cash advances, routing around prohibitively expensive legacy banks and understanding trends in merchants’ growth potential with ever increasing accuracy as the platform scales.”
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Based on our calculations, Shopify Inc. (NYSE: SHOP) ranks 28th in our list of the 30 Most Popular Stocks Among Hedge Funds. SHOP was in 91 hedge fund portfolios at the end of the first quarter of 2021, compared to 90 funds in the fourth quarter of 2020. Shopify Inc. (NYSE: SHOP) delivered a 26.84% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
