Polen Capital, an investment management firm, published its “Polen International Growth” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 5.57% was delivered by the fund for the Q2 of 2021, outperforming its MSCI All Country World benchmark that delivered a 5.47% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Polen Capital, the fund mentioned Shopify Inc. (NYSE: SHOP) and discussed its stance on the firm. Shopify Inc. is an Ottawa, Canada-based e-commerce company with a $188.8 billion market capitalization. SHOP delivered a 33.89% return since the beginning of the year, extending its 12-month returns to 45.44%. The stock closed at $1,515.58 per share on August 26, 2021.
Here is what Polen Capital has to say about Shopify Inc. in its Q2 2021 investor letter:
“Shopify, a Canadian software company, enables merchants and entrepreneurs to run their operations efficiently. We like the focus Shopify brings to merchants. Its products allow merchants to set up an online store, manage inventory, interact with customers, accept payments, and monitor the flow of goods through various distribution channels in one centralized dashboard. Though it offers missioncritical capabilities, Shopify subtly operates in the background while allowing merchants to interact with customers.
As the world increasingly sees direct-to-consumer interactions take flight, both nascent and established brands are adopting Shopify. Today, nearly two million businesses utilize Shopify to sell more than $150 billion in merchandise across the platform. We think these numbers can grow significantly from here. Further, newer product categories like lending and fulfillment (along with a litany of other future merchant pain points we think Shopify can help solve) coupled with higher attach rates for payments could drive higher monetization of a growing user base in the coming five years. We believe Shopify can grow its earnings power at a 30% rate for the coming five years.”
Photo by Roberto Cortese on Unsplash
Based on our calculations, Shopify Inc. (NYSE: SHOP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SHOP was in 85 hedge fund portfolios at the end of the first half of 2021, compared to 91 funds in the previous quarter. Shopify Inc. (NYSE: SHOP) delivered a 21.94% return in the past 3 months.
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. 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
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Disclosure: None. This article is originally published at Insider Monkey.
