Rowan Street Capital, an investment management company, released its Q4 2025 investor letter. A copy of the letter can be downloaded here. Rowan Street generated solid results in 2025 but underperformed the S&P 500 Index. The Composite returned +11.1% (net) in 2025 compared to +17.9% for the Index. Rowan Street delivered a cumulative net return of +252% over the past three years, compared to +78% for the Index during the same period. It is a concentrated strategy with a focus on long-term compounding. 2025 ...

Core Viewpoint - Shopify Inc. has been upgraded from Neutral to Buy by MoffettNathanson, highlighting an attractive entry point at a stock price of $118.40 [1][6] Financial Performance - Shopify is expected to report a revenue increase in the mid-to-high 20% range for Q4 2025, with Zacks Consensus Estimate projecting revenues to reach $3.58 billion, reflecting a 27.3% growth year-over-year [2][6] - The consensus estimate for earnings per share is set at 50 cents, indicating a 13.6% increase from the previous year, showcasing strong financial performance [3][6] Market Position - Shopify's Gross Merchandise Volume (GMV) is estimated at $120 billion, driven by merchant and global expansion, indicating robust market activity [3] - The stock is currently priced at $118.40, with a market capitalization of approximately $154.52 billion, maintaining its status as a significant player in the e-commerce industry [5] Revenue Streams - Merchant Solutions revenues are expected to grow year-over-year, although there may be margin pressures due to shifts in product mix and payment structures [4] - The company is focused on leveraging AI-driven Merchant Solutions to support long-term growth prospects [4]

Summary of Key Points Core Viewpoint - Baillie Gifford's total holdings value decreased to $120.34 billion in Q4 2025, down approximately 10.8% from $135 billion in Q3 2025, primarily due to a net selling strategy and some growth stocks experiencing high-level corrections [1][2]. Group 1: Portfolio Adjustments - Nvidia remains the largest holding despite a 5.76% reduction in shares, accounting for 6.80% of the portfolio [3]. - Mercado Libre saw a 4.95% increase in holdings, raising its share to 5.83%, solidifying its position as a cornerstone of the portfolio [3]. - The top five holdings also include Amazon, Shopify, and Sea Ltd, with the top ten holdings comprising 43.4% of the total portfolio [4]. Group 2: Notable Transactions - Significant reductions were made in Amazon, Shopify, Meta, and Cloudflare, while Google saw a notable increase in holdings by 166%, reflecting a strategic shift towards AI capabilities [5][6]. - Baillie Gifford's investment in Google is valued at approximately $1.7 billion post-increase [6]. Group 3: Investment Philosophy and Trends - The investment team emphasizes the importance of adapting to the AI wave, suggesting that companies must pivot quickly to meet new market demands [9][10][12]. - The transition to AI is viewed as a new paradigm shift, with potential for significant growth opportunities as new companies emerge [14][15]. - The focus is on both "AI core" companies and those using AI as a tool to enhance existing services [21][24]. Group 4: Insights on China and Platform Companies - The sentiment in China has shifted, with a recognition of the country's potential to foster visionary entrepreneurs, particularly in the battery sector where CATL holds a significant market share [25][26]. - Platform companies are highlighted for their ability to create value through network effects and adaptability, requiring a long-term investment perspective [28]. Group 5: Non-Public Company Investments - Baillie Gifford has committed over £6 billion to non-public companies since 2012, recognizing the increasing duration of private company ownership before IPOs [31][32]. - The firm holds significant stakes in companies like SpaceX and ByteDance, which have shown substantial revenue growth compared to public market indices [33]. Group 6: Portfolio Construction Approach - The investment strategy is bottom-up, focusing on global transformations rather than specific trends or technologies [34]. - The portfolio includes a diverse range of companies across various sectors, with ongoing adjustments to capitalize on emerging growth opportunities [38].

Summary of the Conference Call on Software Industry and AI Impact Industry Overview - The conference call focused on the Software industry in North America, particularly the impact of Generative AI (GenAI) on enterprise software capabilities and market dynamics [1][6]. Key Insights 1. **Impact of GenAI on Software**: - GenAI is expanding the capabilities of enterprise software, creating both opportunities and risks for investors [1][8]. - The potential for GenAI to automate a significant portion of unstructured data work (over 80% of organizational data) could add approximately $400 billion to the Enterprise Software Total Addressable Market (TAM) by 2028 [3][8]. 2. **Market Valuation Trends**: - There has been a ~33% pullback in software multiples since October 2025, with current averages around 4.4X EV/Sales, similar to levels seen during previous periods of uncertainty (2014-2016) [8][39]. - The software industry is currently trading at multiples that are 40% below the trailing 5-year average, indicating potential undervaluation [63][68]. 3. **CIO Insights**: - In a recent CIO survey, AI/ML spending is expected to grow to 9.2% of overall public cloud spending within three years, reflecting strong interest in AI capabilities [12][32]. - CIOs have consistently ranked AI/ML as a top priority for IT budgets over the past nine quarters [10][12]. 4. **Competitive Landscape**: - Concerns exist regarding competition from DIY solutions, startups, and model providers, which may erode the market share of incumbent software vendors [17][20]. - However, incumbent vendors are expected to leverage their existing capabilities and customer relationships to adapt and thrive in the evolving landscape [21][24]. 5. **Business Model and Margin Risks**: - The shift towards automation may necessitate changes in pricing models, as traditional seat-based pricing could become less effective [22][24]. - Rising competition and increased infrastructure costs associated with GenAI could pressure margins for software vendors [24][25]. Notable Companies and Investment Opportunities - **Microsoft (MSFT)**: Positioned as a leader in the GenAI space, with a strong adoption rate of its AI tools among CIOs [55]. - **Intuit (INTU)**: Expected to continue its growth trajectory with strong product cycles and margin expansion [55]. - **Salesforce (CRM)**: Benefiting from significant growth in AI-related annual recurring revenue (ARR) [55]. - **ServiceNow (NOW)**: Anticipated to see improvements in free cash flow and margin expansion [55]. - **Atlassian (TEAM)**: Despite perceived risks, it is viewed as undervalued with strong growth potential [56]. - **Snowflake (SNOW)**: Expected to benefit from ongoing data modernization trends [58]. - **Palo Alto Networks (PANW)**: Positioned well in the cybersecurity space, benefiting from increased demand due to GenAI [60]. Conclusion - The software industry is at a pivotal moment, with GenAI presenting both challenges and opportunities. While current market valuations suggest potential for recovery, the ability of incumbents to adapt and innovate will be crucial in determining future success [1][8][39].

bros how do we feel about shopify ...

Core Viewpoint - Shopify Inc. is positioned as a leading e-commerce platform with a strong potential for growth, as indicated by analysts' price targets and earnings projections [1][5]. Group 1: Price Target and Stock Performance - Thanos Moschopoulos from BMO Capital has set a price target of $150 for Shopify, suggesting a potential increase of 33.87% from its current price of $112.05 [1][5]. - Shopify's current stock price of $112.05 reflects a slight increase of 0.73% from the previous trading session, with a trading range today between $109.78 and $115.04 [4]. Group 2: Earnings and Revenue Projections - Shopify is expected to report quarterly earnings of $0.50 per share for the quarter ending December 2025, representing a 13.6% increase from the previous year [2][5]. - The projected revenue for the same quarter is $3.58 billion, marking a 27.3% increase from the previous year [2][5]. Group 3: Analyst Confidence - The stability in earnings projections, with no revisions over the past 30 days, indicates analysts' confidence in their forecasts, which can influence investor behavior and stock price performance [3].

Core Viewpoint - Shopify's stock has faced significant pressure ahead of its fourth-quarter earnings release, declining approximately 31% in the past month due to valuation concerns and geopolitical uncertainty [1] Group 1: Business Performance - Despite the stock selloff, Shopify's underlying business remains strong, with a 32% growth in gross merchandise volume (GMV) and revenue in the third quarter, alongside a free cash flow margin of 18% [2] - Revenue growth has been consistent throughout the year, with increases of 27% in Q1, 31% in Q2, and 32% in Q3, while free cash flow margins improved from 15% in Q1 to 18% in Q3 [3] Group 2: Valuation and Technical Indicators - The recent decline in Shopify's stock has alleviated some valuation concerns, with the stock's 14-day Relative Strength Index at 22.6, indicating potential oversold conditions [4] - Options traders anticipate a post-earnings move of about 11.1%, higher than the average move of 8.6% observed in the past four quarters [5] Group 3: Q4 Outlook - Shopify is expected to deliver strong quarterly results, but growth rates may moderate due to tougher year-over-year comparisons, with management guiding for Q4 revenue growth in the mid-to-high 20% range [7]

Core Viewpoint - The report highlights that high uncertainty has significantly impacted software valuation multiples, which have declined by approximately 33% since October 2025 [2] Group 1: Software Valuation - The average software valuation multiple has returned to around 4.4 times enterprise value/sales, reflecting levels seen during previous periods of high uncertainty in the public cloud sector [3] - Investors are underestimating the ability of existing vendors to benefit from AI adoption [3] Group 2: Investment Opportunities - The report suggests that pessimistic views on generative AI have led to a lack of trust in the ability of existing software vendors to participate in this innovation cycle [4] - Morgan Stanley identifies Microsoft, ServiceNow, Salesforce, Atlassian, Snowflake, Cloudflare, Shopify, and Palo Alto Networks as attractive investment opportunities due to their strong product cycles, improved financial metrics, and discounted valuations [4] - Microsoft is noted as a key player in significant innovation cycles, while the valuation of ServiceNow is described as "very attractive" [4] - Salesforce's AI-related annual recurring revenue has increased by 114% year-over-year [4] - Shopify is viewed as highly capable of capturing a larger share of the expanding online commerce market [4] Group 3: Long-term Opportunities - Generative AI represents a significant long-term opportunity, with an estimated potential to add approximately $400 billion to the broader enterprise software total addressable market by 2028 [5] - The key issue is not whether software will ultimately monetize in this innovation cycle, but rather which companies will participate [6]

Earnings Reports - A significant week for earnings with major companies such as Robinhood Markets, Coinbase, Cisco Systems, Applovin, Shopify, Arista Networks, Cloudflare, Spotify, Airbnb, and McDonald's scheduled to report [1] Implied Volatility - Implied volatility tends to be high before earnings reports due to market uncertainty, leading to increased demand for options [2] - After earnings announcements, implied volatility typically decreases to normal levels [3] Expected Price Movements - The expected price range for stocks can be estimated by adding the prices of at-the-money put and call options from the option chain [3] Daily Earnings Expectations - Tuesday: HOOD (11.7%), F (6.5%), KO (2.9%), NET (13.4%), SPOT (10.4%), GILD (5.5%) [4] - Wednesday: CSCO (5.5%), VRT (10.5%), APP (15.5%), SHOP (12.8%), MCD (3.3%) [5] - Thursday: COIN (11.1%), ANET (10.7%), ABNB (8.6%), AEM (6.9%) [5] Trading Strategies - Traders can utilize expected moves to structure trades, with bearish traders selling bear call spreads and bullish traders selling bull put spreads or looking at naked puts [6] - Neutral traders may consider iron condors, ideally keeping short strikes outside the expected range [6] Risk Management - It is advisable to use risk-defined strategies and maintain small position sizes when trading options over earnings [7] - A full loss from a trade should ideally not impact the portfolio by more than 1-3% [7] High Implied Volatility Stocks - Barchart's Stock Screener can identify stocks with high implied volatility, using filters such as total call volume greater than 5,000, market cap greater than 40 billion, and IV Rank greater than 50% [8]

Economic Data - The People's Bank of China will release January CPI and PPI on February 11 [1] - The National Bureau of Statistics will publish the monthly report on January commodity residential sales price index on February 13 [1] - Financial data including January social financing and new RMB loans will also be released next week [1] - In the US, December retail sales month-on-month will be announced on February 10, followed by January unemployment rate and non-farm employment data on February 11 [1] Earnings Reports - The US earnings season continues with several notable companies reporting next week, including BP, Barclays, Marriott, Coca-Cola, and AstraZeneca on February 10 [2] - Other companies such as NetEase, Youdao, and Total will report on February 11, while TripAdvisor and Hyatt will report on February 12 [2] - In Hong Kong, SMIC will report earnings on February 10, followed by Budweiser APAC and NetEase Cloud Music on February 11 [2] New Stock Issuance - One new stock, Tongbao Optoelectronics, will be available for subscription on February 9, with Ai De Technology listing on the Beijing Stock Exchange on February 10 [2] - Several new stocks will list in Hong Kong, including Lanke Technology on February 9 and Aixin Yuanzhi on February 10 [2] Stock Unlocking - A total of 33 restricted stocks will be unlocked next week, with a total market value exceeding 36 billion yuan, led by Hunan YN with 24.096 billion yuan [3][10] Central Bank Operations - The central bank will have 4.055 billion yuan of reverse repos maturing next week, with specific amounts maturing each day [3][10] Government Bonds - The Ministry of Finance will issue the first phase of RMB government bonds in Hong Kong on February 11, with a scale of 14 billion yuan [13]