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Why eBay (EBAY) Stock is a Compelling Investment Case

Steel City Capital recently released its Q2 2020 Investor Letter, a copy of which you can download here. During the second quarter of 2020, the fund returned 13.1% net of fees, while the S&P 500 Index was up 20.0%. You should check out Steel City 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, Steel City Capital highlighted a few stocks and eBay Inc (NASDAQ:EBAY) is one of them. eBay Inc (NASDAQ:EBAY) is an e-commerce company. Year-to-date, eBay Inc (NASDAQ:EBAY) stock gained 55.5% and on July 20th it had a closing price of $58.47. Here is what Steel City Capital said:

“EBAY: E-commerce platforms have been enjoying a meaningful increase in sales amidst stay-at-home orders and general consumer trepidation about visiting brick and mortar locations. EBAY is no exception, and in early June, the company reported strong growth in gross merchandise value (GMV) across a long list of its categories. Management raised guidance for 2Q GMV growth to 23-26% y/y vs. its recent trend of negative growth. Quarterly revenue growth is now expected at 18% compared to previous guidance of 4%.

While the Partnership’s investment in EBAY has been positive to overall returns, I continue to believe expectations for the company’s future prospects remain too low. While management raised 2Q’20 guidance, full year guidance was maintained. I suspect they were taking a prudent approach given the uncertainties associated with the Covidrelated tailwind (i.e. how long will it last?) and to give the company’s new CEO some wiggle room. Going forward, EBAY is set up for easier GMV and revenue comps in 2H’20 as it laps headwinds created by last year’s implementation of internet sales taxes in various states. Given these factors, there is a good possibility the company raises its full year guidance.

I also anticipate the resolution of the ongoing sale process of the Classifieds portfolio, potentially as early as this week. Following a successful divestiture, EBAY’s management will be in a position to update its capital allocation priorities, with a strong likelihood that the company ramps up share repurchases and dividends.”

In Q1 2020, the number of bullish hedge fund positions on eBay Inc (NASDAQ:EBAY) stock increased by about 2% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with eBay’s growth potential. Our calculations showed that eBay Inc (NASDAQ:EBAY) 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. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. 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.