Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Shopify Inc (NYSE:SHOP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Shopify Inc (NYSE:SHOP) a buy, sell, or hold? The smart money was becoming less confident. The number of bullish hedge fund positions decreased by 6 in recent months. Shopify Inc (NYSE:SHOP) was in 85 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 91. Our calculations also showed that SHOP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Brad Farber of Atika Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy 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. Keeping this in mind let’s take a gander at the recent hedge fund action surrounding Shopify Inc (NYSE:SHOP).
Do Hedge Funds Think SHOP Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 85 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SHOP over the last 24 quarters. So, let’s see 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 $2385.1 million reported as of the end of June. Trailing Lone Pine Capital was ARK Investment Management, which amassed a stake valued at $1781.4 million. Citadel Investment Group, 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 Voleon Capital allocated the biggest weight to Shopify Inc (NYSE:SHOP), around 40.18% of its 13F portfolio. Strategy Capital is also relatively very bullish on the stock, earmarking 26.77 percent of its 13F equity portfolio to SHOP.
Since Shopify Inc (NYSE:SHOP) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that decided to sell off their full holdings heading into Q3. At the top of the heap, Dan Loeb’s Third Point dumped the biggest stake of the 750 funds watched by Insider Monkey, worth an estimated $132.8 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $41.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Shopify Inc (NYSE:SHOP) but similarly valued. These stocks are United Parcel Service, Inc. (NYSE:UPS), T-Mobile US, Inc. (NASDAQ:TMUS), Texas Instruments Incorporated (NASDAQ:TXN), Costco Wholesale Corporation (NASDAQ:COST), McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), and Medtronic plc (NYSE:MDT). This group of stocks’ market values are closest to SHOP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UPS | 52 | 2188804 | 8 |
| TMUS | 100 | 8020682 | 2 |
| TXN | 50 | 2468540 | 8 |
| COST | 54 | 4321174 | -2 |
| MCD | 66 | 2714779 | -1 |
| MS | 69 | 5347633 | -10 |
| MDT | 68 | 3390607 | 3 |
| Average | 65.6 | 4064603 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 65.6 hedge funds with bullish positions and the average amount invested in these stocks was $4065 million. That figure was $13978 million in SHOP’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Texas Instruments Incorporated (NASDAQ:TXN) is the least popular one with only 50 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 62. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately SHOP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SHOP were disappointed as the stock returned 0.4% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
