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In this piece, we will take a look at Cathie Wood and Ark Invest’s latest stock picks. If you want to skip our introduction to the well known and oft controversial hedge fund boss, then you can skip ahead to Ark Invest Stock Portfolio: Top 5 Picks.
Cathie Wood is one of the more controversial hedge fund bosses, and also a relatively newer entrant to the industry. As opposed to some of the biggest hedge funds in the industry, which seek to diversify their portfolios to benefit from both growth and value stocks, Ms. Wood and her hedge fund Ark Invest is a pureplay growth hedge fund. This strategy comes with its fair share of risks and profit potential, and the recent stock market turmoil serves as a perfect illustration of this principle.
The stock market has been in consistent turmoil since the outbreak of the coronavirus pandemic in 2019. The immediate aftermath of the pandemic saw major indexes crash by more than 30% as investors fled to safety due to worries that lockdowns would sap economic growth. Then, the 2022 Russian invasion of Ukraine ushered in fresh shocks as while oil stocks shot up, the growth and technology segment of the stock market cratered in high inflation and the subsequent high interest rate environment.
Ms. Wood’s stock portfolio, which focuses on high growth companies was caught in the financial crossfire. Troubles for her investments started to surface as soon as in the first quarter of 2022, with Morningstar Financial reporting that by the end of Q1 2022, Ark Invest’s ARK Innovation ETF had lost 29.9%. Leading the charge in the ETF’s losses were Roku, Inc. (NASDAQ:ROKU), Zoom Video Communications, Inc. (NASDAQ:ZM), and Shopify Inc. (NYSE:SHOP) whose shares tanked by 45%, 40%, and 50% and brought down the ETF with them. The losses came after the flagship fund fell by 24% in 2021, and it laid bare the risks that come with an all out growth approach that had spurred Ms. Wood to launch her investment firm in 2014.
At the same time though, when the market is doing well and the world is stable, Cathie Wood’s investment strategy is industry leading. This is because in 2020 when markets were optimistic about the beneficial effects of lockdowns on the technology sector, the ARK Innovation ETF had returned more than 9x the S&P 500’s returns by posting 150% in annual returns compared to the benchmark index’s rather modest 16%.
So, with today’s dynamic financial and economic environment, what is Cathie Wood up to? Well, before we get to that, a brief overview of the Q4 2023 U.S. stock market investment climate is necessary. Right now, and as has been the case for most of the year, the Federal Reserve is the star of the show. The central bank has rapidly increased interest rates for more than a year now, and for investors like Cathie Wood, this is nothing but bad news. Higher rates leave consumers with less discretionary spending power, and make financing daily business operations more expensive. These translate into poor stock market performance since the performance of technology companies depends on customers and businesses being able to spend more money.
Right now, the Federal Reserve is caught between assuring markets that it understands that a recent surge in borrowing costs through higher yields can damage the economy and that its primary objective remains controlling inflation. Fed chairman Jerome Powell, speaking to an IMF panel in November, stressed that he was worried that the central bank might not have done enough to bring down inflation and added that there might be a long way to go before inflation comes down to the Fed’s 2% benchmark. For stock markets, this means that growth stocks will continue to face stress until monetary policy is adjusted to allow for economic growth.
With Mr. Powell’s latest comments bursting the bubble surrounding a quick interest rate reduction, one has to wonder what Cathie Wood is thinking. Well, she’s the perma optimistic about innovation driving the world forward, and in a recent talk, talked about a variety of great innovations that change the world.
According to her:
So this is innovation at its best. It is one of the five major innovation platforms around which we have centered our research. So robotics, energy storage, artificial intelligence, blockchain technology, and finally multi-omic sequencing. And this is the innovation platform we want to focus on a little bit today. The miracles coming out of this source of innovation. A year ago, just about this time, a young girl named Elissa in U.K. was cured after being on her death bed hospice [inaudible] in May of that year. In November she was cured. And we think she still is cured, we’d have heard if she weren’t, so let’s put it that way. And this was of a rare form of leukemia, and the cure was gene editing, base editing.
And, what happened last year, we in the innovation world, were all over it. We were so excited, and I called Ali Urman, who is our lead therapeutics analyst. And, said to her, she was at the hematology conference where there was apparently they call it a poster. And I asked her, I called her at the conference, and I said, ‘Ali, is everybody all over this?!’ And she said, “no, no one’s talking about it”. And the investment world didn’t focus on it. If you remember last year this time, we were in a horrendous bear market for innovation. The market may have bottomed in October, but innovation did not bottom until December. The world was black. Nobody could see any hope. And today, we’re seeing something very different.
With the third quarter hedge fund filing season underway, this appears to be the perfect time to see what are Cathie Wood’s latest investments. We did so, and some top Cathie Wood stocks are UiPath Inc. (NYSE:PATH), Coinbase Global, Inc. (NASDAQ:COIN), and Tesla, Inc. (NASDAQ:TSLA).
Cathie Wood of ARK Investment Management
To compile our list of Ark Invest’s latest stock picks, we sifted through the fund’s SEC filings for Q3 2023 and picked out the top 11 stocks in its portfolio. For added context, some of Ms.Wood’s investments in the stocks during Q2 are also provided so the reader can see whether she bought more shares or sold them.
Ark Invest Stock Portfolio: Top 11 Picks
11. Teladoc Health, Inc. (NYSE:TDOC)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $377 million
Number of Hedge Fund Investors In Q2 2023: 28
Teladoc Health, Inc. (NYSE:TDOC) is a telehealth company that digitally connects patients with health care providers. Its third quarter earnings saw operating income jump by 8% annually, as an expanding membership base beefed up revenue.
During Q2 2023, 28 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Teladoc Health, Inc. (NYSE:TDOC). Out of these, the firm’s biggest shareholder in Q2 was also ARK Investment Management as it owned 20 million shares that are worth $515 million.
Teladoc Health, Inc. (NYSE:TDOC) joins Coinbase Global, Inc. (NASDAQ:COIN), UiPath Inc. (NYSE:PATH), and Tesla, Inc. (NASDAQ:TSLA) in our list of Cathie Wood’s top third quarter of 2023 stock picks.
10. Shopify Inc. (NYSE:SHOP)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $379 million
Number of Hedge Fund Investors In Q2 2023: 74
Shopify Inc. (NYSE:SHOP) is a Canadian electronic commerce firm. Its third quarter earnings were a boon for the stock as the firm’s revenue and earnings per share of $1.71 billion and 24 cents, respectively, beat analyst estimates of $1.67 billion and 14 cents. This sent the stock soaring by 22%.
After digging through 910 hedge fund holdings for their June quarter of 2023 shareholdings, Insider Monkey discovered that 74 had invested in the retailer. Shopify Inc. (NYSE:SHOP)’s biggest hedge fund investor was Catherine D. Wood’s ARK Investment Management due to its $573 million stake.
9. Twilio Inc. (NYSE:TWLO)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $417 million
Number of Hedge Fund Investors In Q2 2023: 49
Twilio Inc. (NYSE:TWLO) is a cloud communications company headquartered in San Francisco, California. Like Shopify, Twilio Inc. (NYSE:TWLO) also beat analyst EPS and revenue estimates during its third quarter. Its shares are rated Buy on average, and analysts have set an average share price target of $67.43.
Insider Monkey’s second quarter of 2023 survey covering 910 hedge funds revealed 49 Twilio Inc. (NYSE:TWLO) investors. Out of these, the largest shareholder during Q2 2023 was David Blood and Al Gore’s Generation Investment Management due to its $553 million stake.
8. Exact Sciences Corporation (NASDAQ:EXAS)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $428 million
Number of Hedge Fund Investors In Q2 2023: 45
Exact Sciences Corporation (NASDAQ:EXAS) is a healthcare company that sells DNA screening test kits. It’s the first stock on our list that is rated Strong Buy on average, and if you read Ms. Wood’s statements above, you’ll see why Ark Invest piled in $428 million in the company during Q3 2023.
During the prior quarter, 45 hedge funds out of the 910 polled by Insider Monkey had invested in the company. Exact Sciences Corporation (NASDAQ:EXAS)’s biggest investor among these is Catherine D. Wood’s ARK Investment Management as it owned 7.1 million shares that are worth $671 million.
7. DraftKings Inc. (NASDAQ:DKNG)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $430 million
Number of Hedge Fund Investors In Q2 2023: 40
DraftKings Inc. (NASDAQ:DKNG) provides digital gambling products worldwide. During its third quarter earnings call, management shared that DraftKings Inc. (NASDAQ:DKNG) is raising its full year revenue guidance by $195 million at the midpoint due to higher customer retention.
As of June 2023, 40 out of the 910 hedge funds profiled by Insider Monkey had held a stake in DraftKings Inc. (NASDAQ:DKNG).
6. Block, Inc. (NYSE:SQ)
Cathie Wood & Ark Invest’s Q3 2023 Investment: $481 million
Number of Hedge Fund Investors In Q2 2023: 66
Block, Inc. (NYSE:SQ) is a financial payments technology and services provider. Its shares are rated Buy on average and analysts have set an average share price target of $74.57.
During Q2 2023, 66 hedge funds among the 910 that were part of Insider Monkey’s database had invested in Block, Inc. (NYSE:SQ). Catherine D. Wood’s ARK Investment Management owned the largest stake out of these, which was worth $714 million.
UiPath Inc. (NYSE:PATH), Block, Inc. (NYSE:SQ), Coinbase Global, Inc. (NASDAQ:COIN), and Tesla, Inc. (NASDAQ:TSLA) were some of Ark Invest’s top stock picks during Q3 2023.
Click here to continue reading and check out Ark Invest Stock Portfolio: Top 5 Picks.
Disclosure: None. Ark Invest Stock Portfolio: Top 11 Picks is originally published on Insider Monkey.