Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Shopify Inc (NYSE:SHOP).
Is Shopify Inc (NYSE:SHOP) a healthy stock for your portfolio? Investors who are in the know were in an optimistic mood. The number of long hedge fund positions increased by 1 recently. Shopify Inc (NYSE:SHOP) was in 91 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 90. 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 ranked #27 among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 90 hedge funds in our database with SHOP positions at the end of the fourth quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Chase Coleman of Tiger Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind let’s view the key hedge fund action encompassing Shopify Inc (NYSE:SHOP).
Do Hedge Funds Think SHOP Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 91 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 1% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SHOP over the last 23 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Shopify Inc (NYSE:SHOP) was held by Lone Pine Capital, which reported holding $1894.9 million worth of stock at the end of December. It was followed by ARK Investment Management with a $1187.9 million position. Other investors bullish on the company included Citadel Investment Group, SCGE Management, and Tiger Global Management LLC. In terms of the portfolio weights assigned to each position Strategy Capital allocated the biggest weight to Shopify Inc (NYSE:SHOP), around 26.15% of its 13F portfolio. Himension Capital is also relatively very bullish on the stock, dishing out 13.61 percent of its 13F equity portfolio to SHOP.
Now, key hedge funds have jumped into Shopify Inc (NYSE:SHOP) headfirst. Route One Investment Company, managed by William Duhamel, initiated the most valuable position in Shopify Inc (NYSE:SHOP). Route One Investment Company had $143.2 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also made a $136.7 million investment in the stock during the quarter. The other funds with brand new SHOP positions are Dan Loeb’s Third Point, Anand Desai’s Darsana Capital Partners, and Andreas Halvorsen’s Viking Global.
Let’s now review hedge fund activity in other stocks similar to Shopify Inc (NYSE:SHOP). These stocks are Lowe’s Companies, Inc. (NYSE:LOW), Charter Communications, Inc. (NASDAQ:CHTR), JD.Com Inc (NASDAQ:JD), Royal Bank of Canada (NYSE:RY), Sony Corporation (NYSE:SNE), AstraZeneca plc (NYSE:AZN), and Starbucks Corporation (NASDAQ:SBUX). This group of stocks’ market valuations are closest to SHOP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOW | 61 | 5171876 | -10 |
| CHTR | 74 | 16399220 | -16 |
| JD | 75 | 11309916 | -14 |
| RY | 18 | 716039 | 0 |
| SNE | 27 | 541868 | -1 |
| AZN | 34 | 2660857 | -7 |
| SBUX | 61 | 4442448 | -6 |
| Average | 50 | 5891746 | -7.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50 hedge funds with bullish positions and the average amount invested in these stocks was $5892 million. That figure was $9984 million in SHOP’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Shopify Inc (NYSE:SHOP) is more popular among hedge funds. Our overall hedge fund sentiment score for SHOP is 86. 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 returned 25.8% in 2021 through August 6th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on SHOP as the stock returned 37.8% since the end of March (through 8/6) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
