Shopify Inc. (SHOP.TO)

(Market Call Minute.) If you believe that on-line retail continues to grow, this company provides the infrastructure for smaller companies. It is hitting a new relative strength high, versus the market.

They built a better mouse trap for the smaller retailer. Not earning a ton of money yet, but it has great potential. They have 120,000 online retailers, which allows them to have the same kind of computing power that the big guys have. He sees this continuing to grow.

A great success story. Have done extremely well in terms of revenue growth. Not a typical stock that he would own, but he did buy it on the IPO and sold it afterwards. Valuation is quite high but has been coming down. He needs to see earnings growth. Right now they have top line growth, so the earnings are not there right now. This is more of a typical US tech name.

He has a problem with whether they can build a business with a mote around it so they can make money over the long term. He would watch it for 2 to 3 years before buying it.

The most important thing you can look at with any chart is the highs and the lows. You identify a trend by its peaks and its troughs. The chart on this shows a successive series of lower highs and lower lows. The current low looks to be tested at around $35. It needs to hold that. You need a few more days to see if $35 will hold, to confirm if this downtrend is going to break.

It is a value added service. The only argument about it is valuation. There is risk in the form of overall market risk. Take only half a position. You can see the growth strategy and they have penetrated the market.

A recent start-up company which made its listing on the exchange about 3 months ago. Started hot out of the gate, but has not been so hot as of late. When buying a high growth company, you are buying the future, their growth prospects. Revenue growth has been spectacular, but the question is can they make money on that revenue growth. Can they develop into a company that is really going to be a long-term winner for shareholders? He doesn’t invest in companies like this, because he has doubts of his ability to guess what is going to happen next.

Tech companies consume a lot of money as they build themselves out. The market does not like companies that don’t make money.

He is really focused on growth. This is an e-commerce model for small and medium-sized businesses. They have already sold in 150 countries. If it can work, and it appears that it is, it looks quite good. It could get a lot of momentum on the upside as it grows out. If it executes, it will do very well. The other side is that these things are always being gobbled up by the big guys as things go forward. It doesn’t make money yet, but will do so in another 12 months or so.

This had a huge run up, surprisingly somewhere up to the $40’s. Like a lot of the IPOs in the last month or so, the excitement has started to fade. He would not own the stock as it has too short a history for evaluating and also the price momentum has fallen off. On stocks like this, where there has been a nice pop, the shareholder base is not necessarily long-term holders and you have to be careful. If you own, have a level where you are going to get out of the stock on the way down. This is not one that he would be buying.

This was a hot IPO. Web commerce is a rapidly growing field, and this company does it very well. However, it is a loss making company and will issue a lot more shares to actually grow the business. Plus there are loads and loads of options for management and staff with high incentives to buy. You are probably wisest to take your profits and wait and see how things settle down.

It is doing very well. It is very expensive, but if you ignore the short term you will like what you see at the end of 5 years.