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I learned a lot about investing when I went deep-sea fishing with my dad more than 50 years ago. Maybe you have a similar memory.
I can tell you for sure that I’ll never forget that day off of Florida’s Gulf coast near St. Petersburg. That’s for two reasons.
First, I won a prize for catching the second-largest fish of the day. Second, one of the fishermen on the boat caught a huge hammerhead shark.
I will never forget looking into the shark’s eyes as we were getting ready to haul it and feeling petrified. Then, I noticed that the shark had all these small fish swimming around it.
My dad informed me that these were pilot fish. They often swim with sharks in a symbiotic relationship.
Later, as a tech investor, I kept that lesson in mind. The fact is, you can make a lot of money off the sector’s “pilot fish.”
And Shopify Inc. (SHOP) is one of the best ones around, racking up gains of 2,409%, turning a $25,000 investment into $627,500 in four years.
A Vital Supporter
Now then, you may recall from our chat on February 7 that I have referred to our pilot fish as “Amazon’s Hidden Supercharger.” That shows you just how big and important a so-called tech pilot fish” can really become.
This Canada-based firm plays a vital role in the success of Amazon.com Inc. (AMZN). Ironically, the firm is one few investors know about.
Shopify is targeting a massive growth sector. Statista notes that online sales will rise by 58% from the base year of 2017 through 2023. They’ll have risen from $468 billion to $740 billion.
Now boasting a $1 trillion market cap, Amazon.com Inc. (AMZN) is set to dominate the U.S. market over the long haul. It brings in close to $70 billion in sales every quarter.
And Shopify is one of the big reasons why. See, what most people miss here is that Amazon now relies on thousands of other companies to sell through the firm’s unbeatable storefront.
You don’t have to take my word for it. The data is pretty clear. In the past 12 years, the percentage of third-party sellers has more than doubled. Back in 2007, the figure stood at 26%. It climbed to 54% last year.
Make no mistake. Those vendors who play a pivotal role in Amazon’s success couldn’t do it without Shopify’s help.
The firm works with more than one million merchants across 175 countries. It provides e-tailers with sophisticated software that allows them to plug into Amazon, manage orders, collect payments, and send out emails to buyers.
But wait, there’s more. It also helps them build their own online sites, handle multiple sales channels, and plug into social media. The idea is to ramp up sales by giving buyers a great shopping experience.
Shopify hosts software in the cloud that merchants use to run their business across all their sales channels. These include Web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces.
Talk about a fast mover. Last year, it had $41.5 billion in gross merchandise volume through its channels. That’s compared to just $750 million back in 2012.
That big move translates into massive sales growth. Shopify had a mere $23 million in sales for 2012. But by 2018, that figure had soared to nearly $1.1 billion, an increase of an amazing 4,772%.
That kind of success has translated into massive profits for savvy tech investors.
Between February 2, 2016, when it hit a post-IPO low and February 4 of this year, the stock has gained 2,409%. That’s enough to turn $25,000 into $627,250.
But I believe the stock’s climb is far from over. Yes, earnings have been off lately but the long-term track record here is great.
During the past three years, SHOP has averaged per-share earnings gains of 55%. That means they are doubling roughly every 15 months.
Remember, stock prices tend to follow earnings growth. So, we could easily forecast two doubles in the next three years. But to be conservative, let’s double that to say six years.
At that rate, our original $25,000 would be worth $2.5 million.
By contrast, that same amounted invested in the S&P 500 would be worth $33,750.
Like I keep saying, if you want to become a millionaire from the stock market, you absolutely have to grab hold of tech leaders like Shopify.
In other words, stocks like SHOP are drag cars on the road to wealth that is high tech.
Cheers and good investing,
Michael A. Robinson