In this article, we will discuss 10 e-commerce and tech stocks to buy now according to Christopher Lyle’s SCGE management. If you want to skip our detailed analysis of Lyle’s history, investment philosophy, and hedge fund performance, go directly to 5 E-commerce and Tech Stocks to Buy Now According to Christopher Lyle’s SCGE Management.
Christopher Lyle, an alumnus of Stanford University, worked as an equity analyst at Bain Capital Public Equity LP from 2004 to 2009, where high net worth investors were provided with custom portfolios of liquid assets. Lyle founded SCGE Management L.P in November 2008. SCGE management is a well-reputed investment advisory hedge fund based out of Menlo Park, California. The hedge fund’s investments range from public to late-stage private companies. It currently holds popular stocks in different sectors, including communication, IT, consumer discretionary, utilities, and telecommunication.
SCGE Management’s investing strategy is based on bottom-up stock picking. The fund monitors exposure to different sectors and geographical areas but does not make decisions on a top-down basis.
Based on the latest 13F holdings for the second quarter of 2021, SCGE Management holds 894,000 shares in Shopify Inc. (NYSE: SHOP) worth $1.3 billion. Shopify Inc. (NYSE: SHOP) is a multinational Canadian e-commerce platform for retail point of sale systems and online stores. For the second quarter of 2021, the company posted earnings per share of $2.24, beating analysts’ estimates by a considerable margin of $1.28.
In Airbnb, Inc. (NASDAQ: ABNB), Christopher Lyle owns close to 1.7 million shares which cover 2.41% of the fund’s portfolio. Airbnb, Inc. (NASDAQ: ABNB) has a market capitalization of $106.8 billion. As of the second quarter of 2021, 58 hedge funds in Insider Monkey’s database of 873 funds held stakes in ABNB, compared to 52 funds in the first quarter. Airbnb, Inc. (NASDAQ: ABNB), amongst other travel-related companies, was hit hard by Covid-19. The company has managed to recover its occupancy rate to 61% which is now just 8.9% lower than the 2019 rate.
Amazon.com, Inc (NASDAQ: AMZN) is another well-known stock held by the SCGE management as of the second quarter. The hedge fund owns 120,800 shares in Amazon.com, Inc (NASDAQ: AMZN), worth $415.6 million. The investment covers 3.89% of the fund’s portfolio.
For this article, we picked top 10 ecommerce and tech stocks from the second quarter portfolio of Christopher Lyle’s SCGE management.
Why should we pay attention to SCGE’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10 E-commerce and Tech Stocks to Buy Now According to Christopher Lyle’s SCGE Management
10. RingCentral, Inc. (NYSE:RNG)
Lyle’s Stake Value: $436,742,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 4.09%
Number of Hedge Fund Holders: 47
RingCentral, Inc. (NYSE: RNG) is a California-based company providing communication solutions to businesses around the globe. RingCentral, Inc. (NYSE: RNG) was founded by Vlad Shmunis in 1999. Christopher Lyle’s SCGE management holds 1.5 million shares of RingCentral that amount to over $436.7 million and 4.09% of the 13F portfolio.
RingCentral, Inc. (NYSE: RNG) has a market capitalization of $20.55 billion and posted earnings per share of $0.32, higher by $0.04 than analysts’ estimate, in the second quarter of 2021. On September 15, it was announced that RingCentral, Inc. (NYSE: RNG) was granted a unified license by the Indian Department of Telecommunications. This would make RingCentral, Inc. (NYSE: RNG) the first global cloud provider to be offering Unified communication services to clients with businesses in India.
RingCentral, Inc. (NYSE: RNG) saw a decrease in hedge fund sentiment recently. Based on the data of the 873 funds tracked by Insider Monkey, the number of hedge fund positions decreased to 47 at the end of the second quarter of 2021 compared to 51 positions in the first quarter.
In the Q2 2021 Investor Letter, Baron Opportunity Fund mentioned RingCentral, Inc. (NYSE: RNG). Here’s what the fund said:
“RingCentral, Inc. has been a three-year portfolio holding and remains a leader in the cloud unified communications-as-a-service (UCaaS) space, which includes voice, video, messaging, and call center services. But after posting its third quarter in a row of accelerating revenue growth in the first quarter, RingCentral’s shares began to sell off on fears around heightened competition with both Microsoft Teams, of which RingCentral is a partner, and with Zoom Communications, a former partner who has launched its own voice communications offering. Shares sold off further during the period with the rotation out of secular growth names into cyclicals. We used the pullback in the shares to add significantly to our position given RingCentral’s best-in-class UCaaS technology, including five 9’s contractual service commitments (fully operational 99.999% of the time) for voice, which is orders of magnitude above its competitors; presence in roughly 40 countries; data governance and security requirements; number portability with all the relevant domestic and international carriers; and positioning as the Gartner Magic Quadrant UCaaS Leader. The UCaaS market is still quite early in its adoption curve, with only about 3% penetration of the roughly 400 million existing business landline seats in operation today. We believe RingCentral is in a solid position to capture meaningful share of this market, with its exclusive partnerships with legacy landline players like Avaya, Atos, and Alcatel, which effectively gives it a “hunting license” for about half of those 400 million legacy seats, leveraging joint go-to-market efforts with each partner. We remain confident that RingCentral is well positioned to achieve at least 30% top-line growth for years to come, along with steadily improving operating margins and free cash flow generation.”
9. Okta, Inc. (NASDAQ:OKTA)
Lyle’s Stake Value: $437,243,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 4.09%
Number of Hedge Fund Holders: 57
Okta, Inc. is a cloud software provider based in San Francisco. It offers automated user management, integration, mobile identification, multifactor authentication, and reporting software. Okta, Inc. (NASDAQ: OKTA) serves customers worldwide. It scored impressive digits in the last quarter of 2021. Its fiscal year 2021 revenue totaled $835 million and grew 43% year-over-year, while the subscription revenue grew 44% year-over-year.
Based on the data of the 873 funds tracked by Insider Monkey, the number of hedge fund positions in Okta, Inc. (NASDAQ: OKTA) increased from 48 in the first quarter of 2021 to 57 in the second quarter. SCGE Management is a leading shareholder in Okta, Inc. (NASDAQ: OKTA) with around 1.8 million shares worth $437.2 million. It represents 4.09% of the fund’s portfolio.
Besides, Okta, Inc. (NASDAQ: OKTA), DoorDash, Inc. (NYSE: DASH), Twilio Inc. (NYSE: TWLO), and HubSpot, Inc. (NYSE: HUBS) are few of the best e-commerce and tech stocks to buy according to Christopher Lyle’s SCGE management.
Lakehouse Capital discussed its stance on Okta, Inc. (NASDAQ: OKTA) in their Q2 2021 investor letter. Here’s what the fund said:
“The Fund held 20 positions as of the end of June and exited four during the year (including) Okta. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”
8. ServiceNow, Inc. (NYSE:NOW)
Lyle’s Stake Value: $457,830,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 4.28%
Number of Hedge fund holders: 91
ServiceNow, Inc. (NYSE: NOW) is a US-based software company that develops cloud-based computing platforms to assist companies with managing digital workflows for enterprise operations. It facilitates customers throughout the United States. The company’s market capitalization is $130.05 billion.
SCGE Management’s investment in ServiceNow, Inc. (NYSE: NOW) covers 4.28% of the portfolio through a total of 833,100 shares. Based on the data of the 873 funds tracked by Insider Monkey, the number of hedge fund positions in ServiceNow, Inc. (NYSE: NOW) decreased from 98 in the first quarter of 2021 to 91 in the second quarter. Baron Opportunity Fund shared insights on the company in their Q1 2021 investor letter. Here’s what the fund said:
“We believe short-term focused investors and consensus often miss the longer-term strength and durability of growth and business-model efficiency (earnings and free cash flow margins) of truly special businesses. An example of this is ServiceNow, a SaaS-industry leader and pioneer, and a long-time Fund investment. As shown in the table below, over the seven years from March 2014 through March 2021, ServiceNow experienced eight multiple declines that averaged –32%, ranging from a low of –19% to a high of –52%.
But during that period, ServiceNow demonstrated compounding revenue performance and stronger operating leverage and FCF generation than expected by consensus. The table below shows the first quarter 2014 projections of one of the top software analysts on the Street, Keith Weiss of Morgan Stanley, versus what ServiceNow achieved.
As you can see, over this three-year period, ServiceNow beat revenue expectations by $315 million, or 29%, and generated FCF margins of 23%, trouncing estimates by $186 million, or 138%.The compounding effects of seven years of strong revenue growth and FCF generation drove ServiceNow’s share price to increase from $70.03 on March 5, 2014 to $500.11 on March 31, 2021, a 32% annualized return. A 7-bagger!
ServiceNow delivered these point-a-to-point-b returns despite the eight multiple pullbacks described above, including the one that occurred towards the end of the first quarter. The power of faster-for-longer, cash-generative business models.”
Apart from Servicenow, Inc. (NYSE: NOW), DoorDash, Inc. (NYSE: DASH), Twilio Inc. (NYSE: TWLO), and HubSpot, Inc. (NYSE: HUBS) are few of the best e-commerce and tech stocks to buy according to Christopher Lyle’s SCGE management.
7. PayPal Holdings, Inc. (NASDAQ:PYPL)
Lyle’s Stake Value: $523,498,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 4.9%
Number of Hedge Fund Holders: 143
Paypal Holdings, Inc. (NASDAQ: PYPL) is a US-based multinational company that operates as financial technology, facilitating online payment systems in the majority of the countries around the globe. The company has a market capitalization of about $332.5 billion. PYPL has a price-to-earnings ratio of about 67.50, which is high enough to suggest that investors expect high earnings growth from the company’s stock.
Paypal Holdings, Inc. (NASDAQ: PYPL) has maintained its position in 143 hedge funds as of the second quarter of 2021. Qualivian Investment Partners mentioned PayPal Holdings, Inc. (NASDAQ: PYPL) in the Q2 2021 investor letter and discussed its stance on the firm. Here’s what the fund said:
“PayPal: The company reported a slightly disappointing quarter with revenues growing 19%, missing on the average revenue per transaction due to the accelerated decline in eBay transactions, the higher mix of Braintree transactions, and other impacts from hedging and F/X translations. Given the stock’s significant outperformance in 2020 and heightened expectations coming into the quarter, the stock has been consolidating since the earnings report. Long term we remain bullish on PayPal, given the company’s continued growth in eCommerce end markets, as well as the continued share gains of digital payments/wallets over paper payments.”
Just like PayPal Holdings, Inc. (NASDAQ: PYPL), DoorDash, Inc. (NYSE: DASH), Twilio Inc. (NYSE: TWLO), and HubSpot, Inc. (NYSE: HUBS) are few of the best e-commerce and tech stocks to buy according to Christopher Lyle’s SCGE management.
6. Coupang Inc. (NYSE:CPNG)
Lyle’s Stake Value: $597,750,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 5.59%
Number of Hedge fund holders: 33
Coupang, Inc. (NYSE: CPNG) is a South Korean e-commerce company that serves as the largest online marketplace in South Korea. The company was founded in 2010 and is placed sixth on the list of 10 e-commerce and tech stocks to buy according to Christopher Lyle’s SCGE Management.
The company has a $51.58 billion market capitalization. Its revenue has observed an upward momentum soaring from $4 billion in 2018 to $12 billion in 2020. While the revenue recorded of $4.48 billion for the second quarter of 2021 was in line with the expectations, Coupang, Inc. (NYSE: CPNG) missed the EPS estimate by $0.16. As of the second quarter of 2021, 33 hedge funds in Insider Monkey’s database of 873 funds held stakes in CPNG, compared to 40 funds in the first quarter.
SCGE Management has around 14.3 million shares in Coupang, Inc. worth $597.8 million. The investment covers 5.59% of the fund’s portfolio.
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Disclosure: None. 10 E-Commerce and Tech Stocks to Buy Now According to Christopher Lyle’s SCGE Management is originally published on Insider Monkey.