Shopify (SHOP) Stock Might Be Expensive, Stay Cautious

McLain Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund posted a return of -15.4% for the quarter (net of fees), underperforming its benchmark, the S&P 500 Index which returned 20.5% in the same quarter. However, you should check out McLain Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, McLain Capital highlighted a few stocks and Shopify Inc. (NYSE:SHOP) is one of them. Shopify Inc. (NYSE:SHOP) is an e-commerce company. Year-to-date, Shopify Inc. (NYSE:SHOP) stock gained 147.8% and on July 28th it had a closing price of $985.00. Here is what McLain Capital said:

“Shopify (SHOP) : The currently fast growing, yet unprofitable e-commerce platform for retailers trades at a $120bln valuation on $1.6bln in 2019 revenues, a valuation of 75x sales for a company that ran -8% net margins. Assuming the business will run a normal 10% net margin and trade at a generous 25x P/E in 2030, revenue will need to grow by a factor of 80 times current levels for shareholders to earn a 10% IRR over the next 10 years.”

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Last month, we published an article revealing that Shopify Inc. (NYSE:SHOP) could be the next Amazon.Com Inc (NASDAQ:AMZN). The article highlights that Shopify Inc. (NYSE:SHOP) is the world’s second-biggest online shopping company.

In Q1 2020, the number of bullish hedge fund positions on Shopify Inc. (NYSE:SHOP)  stock increased by about 43% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Shopify’s growth potential. Our calculations showed that Shopify Inc. (NYSE:SHOP)  isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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