Fundamentals are Drastically Improving for Square (SQ) Inc. Says Avory & Co

Jose Karlo Mari Tottoc
·4 min read

Avory & Co, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. In the letter, the firm talked about the key themes they formulated for 2021 and the coming years, through automation, interactive entertainment, digital work, commerce evolution, financial revolution, and a lot more. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Avory & Co, in their Q4 2020 Investor Letter said that their projections for their top holding, Square, Inc. (NYSE: SQ), was met positively by the company amidst the pandemic and still continues to show great numbers. Square, Inc. is a financial services, and mobile payment business that currently has a $97.6 billion market cap. For the past 3 months, SQ delivered a decent 27.52% return and settled at $216.64 per share at the closing of January 25th.

Here is what Avory & Co has to say about Square, Inc. in their Investor Letter:

"At Avory, this principle was tested. Take Square for example, a top holding for years and one of our top holdings heading into the COVID crisis. The implications for Square seemed dire at first glance as physical retailers using the Square point of sale were unequivocally going to struggle. However, those who actively research the company knew that Square had a pristine balance sheet reinforced by a $1B capital raise on March 2nd. The point-of-sale market was still in the early innings of going from legacy to 21stcentury technology. This meant a quicker displacement of legacy with Square well positioned given its financial strength and diversified customer base. This was not the same circumstance for a competitor like Toast, which laid off 50% of its workforce in April. Square's software and entrepreneurial driven culture allowed the company to create new products like curbside pickup, ignite Cash App usage through a well-designed Payroll Protection Program, and sign-up new customers that were in dire need of digitizing their stores with Square Online. This type of execution from Square is nothing new and somewhat predictable to long-standing researchers of the company.

Now, making assumptions on Square’s potential is one thing, but tracking it in real time provides the data required to create conviction. Despite a large segment of Square customers struggling, Square’s fundamentals were drastically improving."

Shopify, SHOP, shutterstock_285148289 payment, online, car, bank, pay, keyboard, transaction, banking, business, card, credit, debit, finance, laptop, computer, shopping, money, buying, commerce
Shopify, SHOP, shutterstock_285148289 payment, online, car, bank, pay, keyboard, transaction, banking, business, card, credit, debit, finance, laptop, computer, shopping, money, buying, commerce

Pachai Leknettip/Shutterstock.com

Last November 2020, we published an article telling that Square, Inc. (NYSE: SQ) was in 13 hedge fund portfolios. SQ delivered a massive 204.91% return in the past 12 months.

Our calculations showed that Square, Inc. (NYSE: SQ) does not belong to the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.

Disclosure: None. This article is originally published at Insider Monkey.