Shopify is the anti-Amazon, this portfolio manager says

Canadian e-commerce darling Shopify (Shopify Stock Quote, Chart TSX:SHOP) has been on an incredible run in 2019, having doubled in value since December 31. But how fast is too fast? Portfolio manager Brett Girard says that even though everything looks to be going SHOP’s way, investors would be wise to hedge their bets.

“We’ve held this stock since the mid-$80s,” said Girard, chief investment officer for Liberty International, to BNN Bloomberg on Monday. “This is a really good example of how you can mitigate your risk: it was a high-flyer at the time and we put just a half-position in and it went from $80 up to $160 and we sold half.”

“So at that point, it’s the house’s money —we’ve taken the original money and put it somewhere else. Since then, it has doubled again, and again, we sold half, leaving a quarter-position from the original half-position. So the point is: take money off the table as something runs,” he says.

Shopify had been growing at a more-than-healthy clip through 2017 and even finished 2018, a year in which tech underperformed, up over 40 per cent. But this year’s growth has been on another level, with the stock having passed its previously set high of $232 in mid-February and even ramping up its pace since then. In May alone, SHOP is up 15 per cent and closed on Monday at $376.23.

The recent rise stems in part from the market’s response to Shopify’s latest quarterly results, which beat analysts’ estimates for both revenue and earnings. The company finished its Q1 with a profit of US$0.09 per share and revenue of US$320.5 million, better than the expected loss of US$0.05 per share and revenue of US$309.4 million.

But Girard says there are other factors in SHOP’s favour, including the addition of the stock to the S&P/TSX 60 index.

“It has been added to the TSX 60 and all of those closet indexers, they have to hug the index, so if Shopify gets added, guess what? They’re buying Shopify. And that’s what’s caused it to take off in 2019,” Girard said.

“Shopify is the anti-Amazon, and that’s how it’s billed by all the startup folks I talk to. If you don’t want to be partaking in Amazon, you go into Shopify,” he says.

“We can talk about Shopify but we can also talk about Valeant, the cryptocurrencies, we can talk about the weed stocks —and I think Shopify has a more fundamental business than a lot of these— but if something goes up too quick, the chances of it going down quick tend to increase,” he said.