Investing

This Billionaire's Hedge Fund Sold an E-Commerce Stock Before a 47% Rally—And Bought This Instead

Will Ashworth

Published: February 7, 2025 5:32 pm

According to Forbes, Paul Marshall is worth $1.1 billion. His hedge fund, Marshall Wace LLP (MW), manages more than $82 billion in securities listed on U.S. stock exchanges. 

As the firm’s chief investment officer, the co-founder is responsible for delivering results. In the latest fiscal year, which ended February 2024, the company’s revenue fell precipitously by 432 million British pounds ($538.5 million) to 768 billion ($957.2 million). Its pre-tax profits suffered a similar fate.  

Fortunately for Marshall and his co-founder, Ian Wace, KKR & Co. (NYSE:KKR) owns nearly 40% of the alternative asset manager, so that it can afford the occasional setback. 

In the latest quarter, which ended Sept. 30, 2024, the hedge fund had $82.1 billion invested in 3,720 securities. 

What stands out is MW’s move from e-commerce to packaging. Here’s why MW likely made these moves.   

Key Points About This Article:

• Hedge fund Marshall Wace made over 3,000 moves in the latest quarter.
• The billionaire’s firm looks to have sold Shopify (NYSE:SHOP) too early.  
• It took the proceeds and invested in Smurfit WestRock (NYSE:SW), the large-cap packaging stock created with the July 2024 merger.    
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

The Moves In Question

Given the number of Securities in the portfolio, every quarter entails many transactions, both into and out of the 82 billion-plus assets invested in US stocks. The third quarter of 2024 was no different.

According to WhaleWisdom.com, 621 new stocks were purchased by MW in Q3 2024, 847 were added to, 662 were completely sold out of, and 905 stocks had their positions trimmed during the quarter. 

Consequently, picking the few trades that stand out on the page is difficult. However, one combination is particularly consequential to the portfolio.

On the sell side, MW sold its entire stake in Shopify (NYSE:SHOP), the Canadian e-commerce software platform, for approximately $240 million in proceeds. Despite selling 568,816 shares in Q2 2024, it still entered the third quarter as the hedge fund’s 59th-largest position, accounting for 0.27% of its assets. 

On the buy side, MW acquired 4.16 million shares of Smurfit WestRock (NYSE:SW) for over $189 million at an average price of $45.67. While the purchase of 1 million shares of Texas Instruments (NASDAQ:TXN) was more significant in dollars, the SW buy accounts for 0.25% of its portfolio, representing an ownership stake of 0.80% in the packaging firm.

Why Dump Shopify?

The hedge fund first owned Shopify stock in Q1 2020, paying an estimated average price of $48.91 for SHOP shares. MW missed out on some additional gains. Since Oct. 1, its shares have appreciated by 47%, which is not insignificant for an additional four-month hold. 

So, why sell the shares?

For starters, its shares had been on a bit of a decline through the first half of 2024 from February to May. They jumped over $70 in July, only to fall below $60 in late summer, making another recovery close to $ and80 by the end of September. 

Having missed an opportunity to sell all of its position at the beginning of 2024 but didn’t, it wouldn’t let a second opportunity to book more profits slip through its fingers. This is not uncommon with large portfolios.

Analysts tend to like the stock. Of the 54 analysts who cover it, only two rate it as a Sell, compared to 32 who give it a Buy rating. However, the target price is only $7 above its current share price. 

Given it trades at 76 times the 2025 analyst EPS estimate of $1.56, it can’t afford too much bad news in the next year. It is priced nearly to perfection. 

The Move Into Packaging

As mentioned, TXN was its largest-dollar purchase in the third quarter,  but Smurfit WestRock was right behind it, starting in the 64th position. Since acquiring SW stock, its shares have gained 15% over the past four months, an annualized return of 45%.

If MW could generate annual returns north of 40% on all its long stock positions, it would be thrilled with its performance.

Truist Securities recently initiated coverage of the large-cap packaging stock, assigning it a Buy rating and a $62 target price, about 20% above its current share price. 

Truist likes SW for three reasons. 

The company recently completed a merger, combining WestRock with Smurfit Kappa to form a larger entity. Truist analysts see potential in the combination. 

The merged entity is expected to generate $52 billion in revenue in 2025. It has the second-largest market share by volume of containerboard in North America; it is the top producer of containerboard in Europe and has a significant market share in North American boxboard production. 

I don’t know if it produces the boxes that Apple (NASDAQ:AAPL) laptops come in, but they are solid while still easily broken down for recycling. 

Lastly, Smurfit WestRock expects to generate $400 million in run-rate synergies by the end of the first year, post-merger, in July.  

With a reasonable dividend yield of 2.31%, it’s a reasonably defensive stock with some growth ahead of it.