Over the last couple of weeks, I’ve been buying shares in my ISA. Specifically, I added to two existing holdings that have risen strongly this year. Here’s why I’ve invested in these particular stocks.
Shopify
I’ve owned Shopify (NYSE: SHOP) shares for around three years now and it’s mostly been a painful experience. After peaking in November 2021, the stock lost over 80% of its value in just seven months.
However, it has rebounded strongly since the turn of the year, notching up a 78% return.
So why have I invested more money in this Canadian e-commerce company?
Well, Shopify recently sold its logistics operation to focus on its core business of providing software for merchants to create and run their online stores. Logistics is a notoriously capital-intensive business, so this move should noticeably increase Shopify’s margins and profitability.
Also, I’m impressed that in 2022 the company held a 10% share of the US e-commerce market by gross merchandise volume. Indeed, that was second only to Amazon.
Comparing the two companies in 2019, Shopify founder and CEO Tobi Lütke said: “Amazon is trying to build an empire, and Shopify is trying to arm the rebels.”
While Amazon remains a competitive threat, Shopify has already “armed” millions of online merchants. And today, they can sell their products on platforms such as TikTok, Facebook, Instagram, YouTube, Snapchat and Pinterest, all thanks to Shopify.
Finally, e-commerce in the US today only accounts for 15% of total retail sales. But according to Ameco Research, global business-to-consumer e-commerce sales will reach $15trn by 2030. That’s up from $4.2trn in 2020!
For this reason, I intend to hold my shares for the long term.
Creo Medical
The second stock I bought is UK small-cap Creo Medical (LSE: CREO). This is a medical devices company that manufactures instruments used in endoscopic surgery.
What does that mean exactly?
It means the firm’s products are used in procedures that deploy an endoscope to examine the inside of a patient’s body (specifically the bowel). An endoscope is a thin, tube-like instrument with a light and camera for viewing.
But Creo’s flagship Speedboat Inject product is multimodal and can dissect, cut out, inject and coagulate all through a single device. This is far less invasive, potentially turning prolonged hospital stays into one-day visits.
As a result, the company estimates that this electrosurgical device saves the NHS £5,000 per procedure. In May, The Royal Oldham Hospital became the latest NHS facility to adopt the Speedboat Inject instrument.
For the 12 months to 31 December, Creo posted sales of £27.2m, up from £25.2m the year before. Yet on an underlying EBITDA basis, it lost £22.1m.
Chief executive Craig Gulliford said: “With global cases using Speedboat Inject more than doubling in FY22 vs FY21, and a fourfold increase in core technology users, our approach to training, mentoring and converting clinicians into regular users is gaining considerable traction.”
The company recently raised over £33m to fund its global growth plans. Management expects this will be sufficient to reach positive cash flow from 2025 onwards. Meanwhile though, the firm is still losing money, which adds risk.
Year to date, the stock has risen 39%, but over five years it’s down 72%. I recently bought the shares at 24p.
