Cathie Wood remains particularly transparent. The chief executive of Ark Invest announces all her trades at the end of each trading day. Investors knew what she was buying and selling in peak year 2020, when her flagship funds more than doubled. And now that her ETFs are lagging far behind the market, she’s still open for a while.
When Cathie Wood goes bargain hunting, the market knows the same day. What’s in her shopping basket now? Rick Munarriz and Keith Speights list their latest purchases on The Motley Fool.
Not for the faint of heart
All of Wood’s ARK Invest ETFs have fallen sharply this year – the flagship ARK Innovation ETF even by more than 55%. But Wood is unafraid and doesn’t shy away from buying declining stocks if she sees longer-term potential in them.
She recently bought shares of Adobe, Velo3D and GM. These three stocks are trading well below their previous highs, but the long-term outlook is brighter than current stock charts indicate. Wood also shopped in the health tech sector, buying Ginkgo Bioworks, Intellia Therapeutics and Teladoc Health. Those are not stocks for the faint of heart.
It’s great to watch Wood shop, but the market isn’t as happy when the companies she invests in start bargain hunting themselves. Shares of Adobe plunged when the company announced that it plans to acquire online design specialist Figma for a whopping $20 billion.
Adobe stock is also under pressure as year-over-year revenue growth has slowed in recent quarters and expectations for the current quarter show no signs of that changing anytime soon.
Adobe is a tech giant, with a market cap of $138 billion. Then a $20 billion acquisition may not seem like much, but analysts think Adobe is paying too much for Figma. They see it as a desperate attempt to reverse the slowing organic growth.
Since the deal was announced, Adobe has seen 20% of its market cap evaporate, making $35 billion go up in smoke. This means that the market has amply discounted the purchase of Figma and may turn the tide for the share.
One of the smallest stocks in Wood’s portfolio is Velo3D. This is a 3D printing company active in the aerospace, industrial energy and oil and gas industries. Velo3D helps companies to make essential parts themselves faster and cheaper than if they were to order them from third parties.
Velo3D is still early in its growth cycle. Last year’s revenue was just $27.4 million, but the company expects to more than triple this year to $89 million. 95% of these are already booked or on order. Next year should be even better. The stock rose after announcing one of its largest orders ever, a purchase of seven printers by a subsidiary of Kevton Industries, and has fallen more than three times since its low two months ago.
One of the investments that stands out in Wood’s shopping basket is General Motors. In three of the past five years, the 114-year-old automaker’s sales have declined. Few would mistake this company for an emerging disruptor. But GM is not only committed to an electric future, with its Cruise platform the company is at the forefront of autonomous driving. It’s also inexpensive, with a P/E ratio of eight.
Recently, Wood stocked more than 2 million shares of Ginkgo Bioworks for her ARK Genomic Revolution ETF. That was an extension of her previous stake in the biotech company, which specializes in cell programming. The company’s goal is to make programming cells as easy as programming computers. The technology is used in agriculture and food, industrial chemicals and pharmaceuticals, among others.
The stock is at a significant loss this year, with a fall of almost 65%. Wood, however, goes for the potential of Ginkgo. She’s probably mostly optimistic about the company’s acquisition activity. Gingko is preparing to acquire Zymergen and Bayer’s West Sacramento Agricultural Biologicals R&D facility.
It takes courage to invest in the biotech company, whose platform can have a disruptive effect. Revenue is growing rapidly, up 231% year-over-year in the second quarter of 2022. Risk-averse investors will likely want to steer clear of Ginkgo. The company is not profitable and the shares are on the pricey side.
Wood also significantly expanded its position in Intellia Therapeutics through its ARK Genomic Revolution ETF. Intellia is a pioneer in gene therapy. It develops therapies using CRISPR gene editing. It is collaborating with Regeneron and Novartis to treat rare genetic diseases. In Intellia’s pipeline is another wholly owned clinical phase program targeting hereditary angioedema.
This share has also performed poorly in 2022 so far. It has fallen almost 50%, mainly due to the poor stock market climate. But Intellia also disappointed investors with its decision to abandon development of a potential treatment for acute myeloid leukemia.
This is really a stock for those with a high risk tolerance and long investment horizon. It could be years before the company has a profitable product on the market. And that road is long and full of bumps. Intellia may face clinical setbacks along the way. On the other hand, the disruptive potential of gene therapies makes it an attractive choice for some investors.
Wood also has her favorites. She has been a fan of Teladoc Health for quite some time. The stock is part of several of its ETFs. Teladoc is practically synonymous with telecare. The company offers a wide range of virtual care services.
However, since the Covid-19 pandemic, telehealth has lost much of its luster for investors. Teladoc has been particularly hard hit. In 2021, the share fell by 54% and this year has dropped another 70%. The company is paying a sky-high price for its 2020 acquisition of Livongo Health; in the second quarter, it wrote off $3 billion on this acquisition.
Some may see Teladoc as a lost cause. Wood clearly doesn’t, but that takes courage. There are still great opportunities for virtual care in the decades ahead, and Teladoc remains a clear market leader. The stock trades at just 2.2 times sales. It just might make a huge comeback in the coming years.
Also read: 6 speculative tips from Cathie Wood