| Author | Message | ||
     Kubang Celebrity Bewarse Username: Kubang Post Number: 38672 Registered: 09-2011 Posted From: 161.141.1.1 Rating: N/A |
Dear Triple Play Strategist, The fourth quarter started with a whimper. The markets gave up a little ground as everyone got ready for earnings season. With hurricanes, political winds, and a shrinking Federal Reserve balance sheet, now could be the time to get a little defensive. But the last quarter is typically the best for retail sales, and while storms cause human misery, they also stimulate commerce, so there’s good reason to tough it out, as long as you have the guts to live through the ups and downs. And boy did we have our downs last week. Little happened with Polaris Industries (NYSE: PII), other than a brief research report noting that motorcycle and off-road vehicle sales are down in general. That curbed the stock’s momentum, but didn’t reveal new information. Novo Nordisk (NYSE: NVO), also had a quiet week. Not so for Shopify (NYSE: SHOP), our Canadian internet-based commerce platform. Famed short-seller Andrew Left of Citron Research issued a scathing report on Shopify just days after we purchased the name, claiming the company breaks many FTC regulations, charging that the company has less than one-tenth of the users it advertises, and suggesting that it’s nothing more than a multi-level marketing scheme where Shopify pays affiliates to bring on new members. As we’d say in the South, “Them’s fightin’ words!” Left’s comments drove the stock down 13% on the first day and another 9% on the second before it recovered. But company officials and Shopify users didn’t take the challenge sitting down. They defended the company, pointing out its exceptional user growth rate and the many alliances that give Shopify access to more small business users, like the recently announced deal with Instagram. As for many of the users quickly dropping out, well, that’s the nature of offering any service to small businesses. Most of them fail, so you have to keep bringing in new blood. The short-seller’s biggest rap on Shopify was that it pays affiliates to bring on clients. That’s true, but the payments are based on the clients actually doing business. If the clients don’t generate revenue, then Shopify doesn’t pay. Last year, Shopify users generated more than $10 billion selling actual goods, so clearly there’s meat on the bone. Overall, I’m comfortable with Shopify’s business and response. I wish the price hadn’t plummeted, but we’ve been here before. Another short seller attacked iRobot last summer. The stock fell out of bed, but eventually recovered and we booked a 20% gain on the position. I hope Shopify rebounds quickly and proves Mr. Left wrong. All three positions remain a buy this week. Ignorance is bliss |