Yesterday, Shopify (SHOP US) powered to new highs. Shopify is a small cap stock, but we have long been intrigued by its incredible potential and ability to successful grow its sales platform. As such, it is one of our biggest equity holdings and has delivered tremendous alfa to our equity portfolios.
We first wrote about Shopify in August of last year:
In December of 2016, ‘The Motley Fool’ recommended Shopify as a top pick, and followed up its recommendation this week:
Our investments in Shopify have been very successful. However, a significant amount of our performance is due to having ‘averaged up’ as our investment thesis continued to validate itself. Sure, it looks nice to have a position that has doubled from its purchase price, but net return – or how much money we actually made off of the stock – is far more important. For example, a 1% position that doubles has a net attributable performance of +1%. That’s great, but a 5% position that increases 50% has a net attributable performance of +2.5%. In other words, we believe that high conviction holdings that continue to validate or strengthen your investment thesis are what actually power investment performance, not ‘side bets’ or slight ‘over-weights and under-weights’ (otherwise referred to as ‘tracking error’) of any given benchmark.
Here’s a summary of analyst recommendations from Bloomberg. Shopify reports their Q4 earnings before the opening bell on February 1st. I would not be surprised to see a flurry of upgrades.
DISCLAIMER: WE HOLD SHOPIFY STOCK IN OUR PORTFOLIOS