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How did Baron view the pullback in Shopify shares?

Shopify shares were among the positions that weighed on performance in Baron Fifth Avenue Growth Fund's second-quarter 2026 investor letter. According to the fund’s management, the stock’s 3.7% decline was driven by a contraction in valuation multiples, not by any weakening in the company’s core operations. The price-to-earnings multiple fell by 8.5% over the same period.

Shopify Inc. shares closed at $147.37 on 31 August 2026. The stock rose 19.52% over the past month and posted a 5.99% return over the past 12 months. The company’s market capitalization stood at $189.59 billion, while its 52-week range was between $94.00 and $182.19.

Why did investors remain cautious despite continued growth?

The fund letter said the company’s operational outlook remained strong. Gross merchandise volume rose 30% year over year in the second quarter, while revenue increased 32%. Even so, concerns in the market that AI-powered applications could become more dominant in the future of e-commerce than traditional websites were seen as a drag on the stock.

Baron said those artificial intelligence concerns were overstated. The letter said Shopify’s data trove from its ecosystem of millions of merchants provides an important foundation for building new tools, and that recent product launches have strengthened the platform’s position in next-generation commerce infrastructure.

Hedge fund ownership declined in the second quarter

Data showed that 82 hedge funds held a position in Shopify at the end of the second quarter. That was down from 88 in the previous quarter. The company also did not appear on the list of the 40 most popular stocks among hedge funds.

Fund returns beat indexes as stock picking stood out

Baron Fifth Avenue Growth Fund posted a 24.6% return on institutional shares in the second quarter of 2026. That outpaced the Russell 1000 Growth Index, which rose 16.7%, and the S&P 500, which gained 15.2%. The fund’s year-to-date return was reported at 11.7%.

After falling 10.4% in the first quarter due to geopolitical tensions, the fund staged a strong rebound in the second quarter following the ceasefire and a drop in oil prices. Stock selection added 940 basis points to performance, while sector allocation had a 152-basis-point negative effect.

  • The decline in Shopify was linked more to valuation pressure than to operating results.
  • Although the company’s growth numbers remained strong, AI-related competition debates limited investor appetite.
  • The drop in hedge fund ownership pointed to a more cautious stance among institutional investors.
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