Large Investors | Shopify regains the interest of the Caisse

The e-commerce solutions provider Shopify is once again becoming attractive to the Caisse de depot et placement du Québec.

Richard Dufour

The Press

After significantly lowering its investment in the Ottawa company last year, the largest institutional investor in Quebec has just quietly bought large blocks of Shopify shares.

The Caisse bought tens of millions of dollars worth of Shopify shares during the first three months of the year. A total of 619,000 Shopify shares were added to the portfolio in the first quarter, according to a document filed in recent days with the Securities and Exchange Commission.

This is an increase of 90% of this investment compared to what it represented to start the year. Shopify shares are now worth approximately $106 million in the Caisse’s portfolio.

After making Shopify one of its biggest stock market investments during the pandemic, the Caisse had almost entirely liquidated its Shopify shares last year.

Asked to comment on its decision to repurchase shares of Shopify again, the management of the Caisse affirms that it is mainly a question of “adjustments” of portfolios.

“The markets have been very volatile over the last 12 months, especially for the tech/growth universe, and we have taken advantage of certain opportunities, including Shopify,” said spokesperson Kate Monfette.

The Caisse had bought its first shares of Shopify at the end of 2020. Massive purchases of shares and the appreciation of the stock market then quickly increased the value of this investment to more than 700 million in 2021.

The value of Shopify had appreciated so much two years ago that at some point in 2021, this company had the largest stock market value in the country, at some 200 billion.

The title of Shopify has since taken a nosedive and the company is now worth a hundred billion on the stock market after having tripled in value since its low reached last October.

The fall of the title had followed a general decline in technology stocks.

At the beginning of last summer, the shares of Shopify held by the Caisse were worth only twenty million.

Shopify management announced in early May that it would cut its workforce by just over 20%. The company had already laid off 10% of its employees last summer (the equivalent of around 1000 people) explaining that it had incorrectly anticipated the growth of online commerce.

Shopify’s stock surged two weeks ago in reaction to the presentation of the year-end financial performance. Revenue growth, among other things, seems to have impressed. The company took the opportunity to indicate that it had found a buyer for its logistics activities.

The announcements in early May reflect greater discipline in capital allocation amid growing concerns about a growth-at-all-costs approach, commented analyst Richard Tse of Financière National Bank, in a recent research report.

Out of around fifty analysts who follow Shopify, around twenty recommend buying the title.

Shopify’s products and services allow its users to create and manage an online store. The company’s shares have been listed on the stock exchange for eight years.

Significant transactions

Quebec’s major institutional investors multiplied transactions during the first three months of the year in order to position themselves for the spring. Here are some meaningful gestures.

deposit box

• Head of Liquid Markets: Vincent Delisle
• Headquarters: Montreal
• Highlight: Increased participation in Shopify
• Other significant gestures in the first quarter of 2023
• Sale of 4.5 million shares of Osisko Royalties
• Sale of 5.5 million shares of AT&T
• Sale of 3.9 million shares of Bank of America

The Caisse added several new securities to its portfolio during the first quarter. The largest pension fund in Quebec notably purchased 1.3 million shares of Teck Resources, 1.1 million shares of waste management specialist GFL Environmental, and nearly 1 million shares of auctioneer Ritchie Bros. After lowering its investment in AT&T by 21% at the end of last year following the sale of 6.2 million shares, the Caisse sold a block of 5.5 million shares of this American telecom giant at the start of the year.

PSP Investments

• Chief Investment Officer: Eduard van Gelderen
• Headquarters: Ottawa (main office in Montreal)
• Highlight: Significant increase in investment in Scotia
• Other significant gestures in the first quarter of 2023
• Purchase of 2.8 million shares of Manulife
• Purchase of 1.1 million shares of Uber
• Sale of 1 million shares of Barrick Gold

The Public Sector Pension Investment Board (PSP) – one of the country’s largest pension fund managers – has increased its investment in Scotiabank by almost 600% over the past three first months of the year with the net purchase of 1.7 million shares of the financial institution. A block of 1.5 million CIBC shares was also added to the portfolio, while PSP reduced its stake in TD by 16% (sale of 725,544 shares).

Fiera Capital

• Chief Investment Officer, Public Markets: Jean Michel
• Headquarters: Montreal
• Highlight: Reduced placement size in Alphabet
• Other significant gestures in the first quarter of 2023
• Sale of 1.1 million shares of Enerplus
• Sale of 2.4 million shares of Exelixis
• Purchase of 685,571 shares of BWX Technologies

Placement in Alphabet (Google) is reduced again. After lowering it by 1.3 million shares in the previous quarter, the Montreal asset manager reduced it by 11% at the start of the year by selling an additional 1.9 million shares. Investments in Oracle (-518,620 shares), Johnson & Johnson (-406,804 shares) and Canadian Natural Resources (-253,290 shares) are notably also cut.

Jarislowsky Fraser

• Head of research: Charles Nadim
• Head of Equities: Kelly Patrick
• Headquarters: Montreal
• Highlight: Reduced Placement in Shopify
• Other significant gestures in the first quarter of 2023
• Purchase of 5.5 million shares of TC Energy
• Sale of 702,205 shares of Stantec
• Sale of 505,007 shares of CAE

For the second quarter in a row, the Scotiabank-owned asset manager substantially increased its stake in TC Energy. Jarislowsky had increased this investment by 1,200% in the home stretch of 2022 by buying 6.4 million shares of the gas pipeline operator. This time, it is up to 80% that the investment increases. The portfolio value of the shares of this company formerly called TransCanada Pipelines is now close to the $700 million mark.

Letko Brosseau

• Investment Managers: Peter Letko and Daniel Brosseau
• Headquarters: Montreal
• Highlight: Significant reduction in investment in Teck
• Other significant gestures in the first quarter of 2023
• Sale of 1.6 million shares of TC Energy
• Sale of 2.3 million shares of CI Financial
• Purchase of 1.4 million shares of Adient

The Montreal asset manager dumped its stakes in TC Energy and CI Financial earlier this year. That in Maxar was also eliminated with the sale of 790,000 shares of this company in the aerospace sector. While Letko cut its position in Manulife by 4% in the first quarter, investments in GE, Cisco Systems, IBM, Netflix and Warner Bros were all liquidated during the first three months of the year.

Methodology: Large institutional investors are required to report to the Securities & Exchange Commission quarterly the contents of their portfolios of stocks that sell in US markets. The securities of many Canadian and Quebec companies are traded in the United States, which makes the documents filed by Quebec institutions interesting. These statements are tracked in order to get signals revealing where big investors are identifying values. The documents covering the first quarter of 2023 have been filed in the last few days, which allows to see how the big investors in the province have positioned themselves for the start of the new year.