5 Ways the Smart Money is Playing Trillion Dollar E-commerce Trend

Thanks to the internet and advanced delivery technology, E-commerce is booming. According to Statista, retail e-commerce sales globally have soared from $1.336 trillion in 2014 to $2.304 trillion in 2017. Analysts expect the number to rise to as much as $4.878 trillion in 2021. Given the large market and strong growth numbers, many e-commerce companies are in prime position to benefit. Let’s analyze five e-commerce stocks that hedge funds and other smart money funds are holding to gain exposure to the trillion dollar e-commerce trend.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Amazon.com (NASDAQ:AMZN), The Washington Post (NYSE:WPO), Berkshire Hathaway Inc. (NYSE:BRK.A), Apple Inc. (NASDAQ:AAPL)

Amazon.com, Inc. (NASDAQ:AMZN)

Amazon is worth over $900 billion for good reason. The e-commerce giant has around 49.1% market share in the gigantic U.S. e-commerce market, worth $258.2 billion in 2018. What’s better, that number rose nearly 30% year over year, and the company’s market share is actually growing. At the end of 2017, Amazon’s market share in e-commerce was around 44%. Bulls like Amazon’s Prime program that is now moving towards 1 day delivery, which might increase revenues further. Of the around 700-740 elite funds we track, 168 funds owned $19.02 billion of Amazon.com, Inc. (NASDAQ:AMZN) on December 31, versus 150 funds and $21.77 billion respectively on September 30.


In second place in the American e-commerce market is eBay, which has around 6.6% market share. Although it is still known for its auctions, the company is becoming more amazon like. The company is now offering more guaranteed 3-day, next-day or 2-day shipping, and it’s also trying to make it easier to buy products like Amazon. 42 top funds we track were long eBay Inc (NASDAQ:EBAY) at the end of December.

Walmart Inc. (NYSE:WMT)

Although it’s known more for its physical retail stores, Walmart is fourth in U.S. retail e-commerce sales share for 2018, coming in at 3.7%, behind Ebay, Apple, and Amazon. Walmart has increased its operations by buying Jet.com, and the company hopes to gain market share by leveraging its physical stores, which is 15 miles within the majority of American homes. 63 top funds had a bullish position in Walmart Inc. (NYSE:WMT) as of the most recent 13-F reporting period, up 3 funds from the previous quarter.

Alibaba Group Holding Limited (NYSE:BABA)

Whereas Amazon might have 49% market share in America, Alibaba has around 60% market share in China. It has over half a billion active shoppers and its growing rapidly. Shares have not done as well as Amazon because of the trade war and the state of the Chinese economy. Nevertheless, 113 top funds had a bullish position in Alibaba Group Holding Limited (NYSE:BABA) as of the most recent 13-F reporting period.


JD.com is also a player in the Chinese e-commerce market and the stock is less shorted than Alibaba’s is. JD has a short float percent of 5.25% versus Alibaba’s 14.77%. Of the around 700-740 elite funds we track, 34 funds owned $2.23 billion of JD.Com Inc (NASDAQ:JD) on December 31, versus 32 funds and $2.97 billion respectively on September 30.