In this article, we will discuss 5 e-commerce and tech stocks to buy now according to Christopher Lyle’s SCGE management based on Q2 holdings of the fund. If you want to read our detailed analysis of Lyle’s history, investment philosophy, and hedge fund performance, go directly to the 10 E-commerce and Tech Stocks to Buy Now According to Christopher Lyle’s SCGE Management.
5. Sea Limited (NYSE:SE)
Lyle’s Stake Value: $619,172,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 5.8%
Number of Hedge Fund Holders: 104
Sea Limited is a Singapore-based consumer internet company that has developed an integrated platform consisting of digital entertainment, electronic commerce, and digital financial services. Sea Limited (NYSE: SE) observed a loss of $0.61 per share in the second quarter of 2021 and missed the EPS estimate by $0.12.
Hayden Capital shared its stance on Sea Limited (NYSE: SE) in their Q4 2020 investor letter. Here’s what the fund said:
“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the e-commerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an e-commerce one)…” (Click here to see the full text)
4. DoorDash, Inc. (NYSE:DASH)
Lyle’s Stake Value: $763,986,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 7.15%
Number of Hedge Fund Holders: 45
DoorDash Inc. (NYSE: DASH) is a US-based online food ordering and delivery platform. With a 56% market share, it emerges as the largest food delivery company in the United States. Christopher Lyle’s SCGE Management holds 4.3 million shares in DoorDash, Inc. (NYSE: DASH) worth $764 million. The investment forms 7.15% of the hedge fund’s portfolio, meriting its inclusion in the list of 10 e-commerce and tech stocks to buy now according to Christopher Lyle SCGE Management.
DoorDash, Inc. (NYSE: DASH) witnessed a bullish sentiment. As of the second quarter of 2021, 45 hedge funds in Insider Monkey’s database of 873 funds held stakes in DASH, compared to 38 funds in the first quarter. DoorDash, Inc. (NYSE: DASH) has also shown stronger than expected revenues over Q2 2021 with sales rising 83% year-over-year to about $1.2 billion. However, the company missed the EPS estimate by $0.02 for the second quarter of 2021.
3. HubSpot, Inc. (NYSE:HUBS)
Lyle’s Stake Value: $820,470,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 7.68%
Number of Hedge Fund Holders: 54
HubSpot, Inc. (NYSE: HUBS) provides cloud-based platforms to huge enterprises for operations including marketing, sales, and customer services. Based on the data of the 873 funds tracked by Insider Monkey, 54 hedge funds were bullish on the stock, as of the second quarter of 2021, in comparison to 46 in the first quarter. The most valuable stake in HubSpot, Inc. (NYSE: HUBS) is currently held by Christopher Lyle’s SCGE management worth over $820 million.
In their investor letter for Q2 of 2021, Wasatch Core Growth Fund shed some light on HubSpot, Inc. (NYSE: HUBS). Here’s what the fund said:
“Our purchases during the quarter were balanced with a similar number of sales, including HubSpot, Inc. (HUBS). The company provides a cloud-based, integrated marketing and sales platform that helps in lead generation and maintaining a presence on social media. Although we’re still extremely impressed with HubSpot, we sold the stock because its market cap, over $25 billion, became rather large for the Fund. Within other Wasatch funds with a larger-cap focus, we still enthusiastically own the company.”
2. Twilio Inc. (NYSE:TWLO)
Lyle’s Stake Value: $1,096,987,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 10.27%
Number of Hedge Fund Holders: 98
Twilio Inc. (NYSE: TWLO) is an American cloud communication platform with a market capitalization of $62.51 billion. Christopher Lyle’s SCGE management has a stake worth over $1.09 billion in the company which accounts for 10.27% of the hedge fund portfolio.
Lakehouse Capital shared some insights on the company 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) Twilio. 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.”
1. Shopify Inc. (NYSE:SHOP)
Lyle’s Stake Value: $1,306,116,000
Percentage of Christopher Brown Lyle’s 13F Portfolio: 12.23%
Number of Hedge Fund Holders: 85
Shopify is a Canadian e-commerce platform and subscription-based software that allows users to create their online stores. It was founded in 2006 and ranks first on the list of 10 e-commerce and tech stocks to buy now according to Christopher Lyle’s SCGE Management.
Headquartered in Ottawa, Canada, the company has a market capitalization of $185.59 billion. With 894,000 shares, SCGE management has a stake worth $1.3 billion in Shopify Inc. (NYSE: SHOP).
Based on the data of the 873 funds tracked by Insider Monkey, the number of hedge fund positions in Shopify decreased from 91 in the first quarter of 2021 to 85 in the second quarter. Aubrey Capital Management is the largest stakeholder in Shopify Inc. (NYSE: SHOP) with shares worth over $8 billion. SCGE management holds the eighth spot with a 13F portfolio weightage of about 12.23%. Shopify beat analysts’ estimated EPS by $1.28 for the second quarter of 2021.
Worm Capital mentioned Shopify Inc. (NYSE: SHOP) in its Q2 2021 investor letter. Here’s what the fund said:
“In particular, the very nature of travel is changing: Longer stays, more flexible remote work policies, and so on. As its marketplace matures, we see significant similarities to our position in Shopify: An international focus led by managers who understand that, in land-grab environment, focusing on its unique value proposition for its sellers—i.e. keep costs low, improve the platform with additional features, etc.—takes precedent over short-term earnings. In other words, we like businesses that play the long game. Unlike Airbnb, Shopify drove positive attribution this past quarter. Still, we think this opportunity is still vastly undervalued over the long-term.
Last year, in the Q2 2020 Investor Letter, we wrote a bit about the similarities and differences between AMZN and SHOP, but concluded they “both display winner-take-most dynamics in their respective domains.” We still believe that thesis is true: E-commerce is still, relatively speaking, in its early days. Despite the pandemic push, e-commerce retail still represents less than 15% of overall retail sales, per latest Fed data.
What that means, in practice, is that the opportunity for low-end disruption (i.e. create a scalable backbone for sellers to launch e-commerce business cheaply) is an enormous, underappreciated opportunity to create new economic value. Shopify is growing its GMV at high velocity (114% YoY in its most recent quarter to over $37 billion) but it’s a tricky business to value—which is good. We like tricky valuations. Our research process looks out several years into the future, which is really the only way to value a business properly—especially in a disruptive environment. (Trying to look at potential short-term earnings or even a simple price-to-sales multiple is not a good way to model out valuations on Shopify.) When thinking about a position like Shopify, we view them as generational company—much like AMZN—that is building the global infrastructure to enable small and medium-sized business to transact online, and, most importantly, keep their unique identity and branding.
Where AMZN optimizes for efficiency, SHOP optimizes for experience. The scale of this opportunity is vast, and Shopify’s reach is wide. The focus—much like ABNB—is keeping costs low for sellers, attract new vendors, improving the ecosystem for merchants. “The rebels are winning,” Shopify president Harley Finkelstein said recently (in a quote we liked so much we made it the title of this letter). “We are betting on a different vision of the future of commerce. We are making it possible for every business to present their brand in their own unique way. A stark contrast to selling on a centralized marketplace.”
You can also take a peek at the 10 Best Stocks to Buy According to Billionaire Daniel Sundheim and 10 Best Stocks to Buy According to John Paulson
