Did Hedge Funds Drop The Ball On Shopify Inc (SHOP) ?

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Shopify Inc (NYSE:SHOP).

Shopify Inc (NYSE:SHOP) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that shop isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Colin Moran Abdiel Capital

Colin Moran Abdiel Capital

Let’s take a peek at the key hedge fund action regarding Shopify Inc (NYSE:SHOP).

How are hedge funds trading Shopify Inc (NYSE:SHOP)?

Heading into the second quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHOP over the last 15 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SHOP Positions

According to Insider Monkey’s hedge fund database, Abdiel Capital Advisors, managed by Colin Moran, holds the largest position in Shopify Inc (NYSE:SHOP). Abdiel Capital Advisors has a $327.2 million position in the stock, comprising 25.6% of its 13F portfolio. Coming in second is Whale Rock Capital Management, managed by Alex Sacerdote, which holds a $203.3 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass Christopher Lyle’s SCGE Management, Jim Simons’s Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Since Shopify Inc (NYSE:SHOP) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds who sold off their positions entirely by the end of the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dumped the biggest stake of all the hedgies followed by Insider Monkey, totaling close to $11.8 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $7.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Shopify Inc (NYSE:SHOP) but similarly valued. These stocks are Telefonica Brasil SA (NYSE:VIV), Cheniere Energy Partners LP (NYSE:CQP), Edison International (NYSE:EIX), and Check Point Software Technologies Ltd. (NASDAQ:CHKP). This group of stocks’ market caps match SHOP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIV 9 69810 -3
CQP 7 14019 3
EIX 27 1425279 -1
CHKP 24 749535 -2
Average 16.75 564661 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $565 million. That figure was $1231 million in SHOP’s case. Edison International (NYSE:EIX) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 7 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on SHOP as the stock returned 34.1% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.