In this article, we discuss 10 Cathie Wood stocks that can rebound in Q4. If you want to see more stocks in this selection, check out 5 Cathie Wood Stocks that Can Rebound in Q4.
Cathie Wood, the CEO of ARK Investment Management, is often the talk of Wall Street due to her bold market moves and stock forecasts. Cathie Wood’s ARK portfolio took a heavy beating amid the mass selloff in growth stocks in 2022, and the fund is down about 55% year to date. However, Wood remains adamant in her stock holdings, since she believes that the investment horizon for her growth portfolio to generate notable returns is at least five years. She continues to double down on her bullish bets, despite the stocks plummeting largely this year.
On August 23, Cathie Wood purchased more than 800,000 shares of Zoom Video Communications, Inc. (NASDAQ:ZM) worth $68.25 million, as the stock reached its pre-pandemic levels. Bloomberg data suggests that Wood also either owns or has previously owned options of Zoom. In June, Wood predicted a $1,500 price target for Zoom Video Communications, Inc. (NASDAQ:ZM) by 2026 and a minimum of $700 in case of a bearish scenario. She said that over the next five years, hybrid and remote work models are likely to prevail, which will be a positive catalyst for Zoom Video Communications, Inc. (NASDAQ:ZM). The stock is down about 56% year to date as of August 23, but Cathie Wood is loading up on the shares as she sees it rebounding soon. ARK also added 14% to its position in Zoom Video Communications, Inc. (NASDAQ:ZM) during Q2 2022.
Similar to Wood’s Zoom Video Communications, Inc. (NASDAQ:ZM) bet, the ARK portfolio has multiple stocks which have been beaten down since the beginning of 2022 due to the mass selloff in growth plays. However, Cathie Wood believes that her fund has bottomed, and as the economy begins to rebound in the later half of 2022, her stocks shall make a recovery. Some of the Cathie Wood stocks that can rebound in Q4 include StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG).
Our Methodology
We used the Q2 2022 portfolio of Cathie Wood’s ARK Investment Management for this analysis, selecting the stocks that are down in 2022, yet Wood remains bullish on them as she sees long-term potential. These stocks can begin to rebound as soon as Q4 2022. We have ranked the list according to the hedge fund sentiment around the securities, which was measured from Insider Monkey’s database of about 900 elite hedge funds as of the second quarter of 2022.
Cathie Wood of ARK Investment Management
Cathie Wood Stocks that Can Rebound in Q4
10. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 20
Share Price Decline YTD as of August 23: 28.35%
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a California-based company that works as a contractor for the U.S. Department of Defense. The company operates through two segments, Kratos Government Solutions and Unmanned Systems. Cathie Wood’s ARK Investment Management owned 8.2 million shares of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) in the second quarter of 2022, worth $118.6 million, representing 0.70% of the total 13F securities.
With the Russia Ukraine war escalating geopolitical tensions globally, and now the impact of the China-Taiwan situation threatening to spill over in the United States after House Speaker Nancy Pelosi’s Taiwan tour, security and defense stocks like Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) are likely to be highly demanded and rebound as soon as Q4. On August 4, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) reported its Q2 results, with an EPS of $0.07 and a revenue of $224.20 million, outperforming market consensus by $0.03 and $13.63 million, respectively. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) also secured two contracts for aerial target drone systems on August 8 and August 9, collectively worth $34 million.
According to Insider Monkey’s data, 20 hedge funds were bullish on Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) at the end of June 2022, up from 17 funds in the earlier quarter. D E Shaw is a notable stakeholder of the company, with 1.26 million shares worth $17.5 million.
Like StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG), Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is one of the Cathie Wood stocks that can rebound in Q4.
9. Archer Aviation Inc. (NYSE:ACHR)
Number of Hedge Fund Holders: 22
Share Price Decline YTD as of August 23: 40.84%
Archer Aviation Inc. (NYSE:ACHR) was incorporated in 2018 and is headquartered in Palo Alto, California. The company designs and manufactures electric vertical takeoff and landing aircrafts to carry passengers. Cathie Wood owns more than 10 million shares of Archer Aviation Inc. (NYSE:ACHR) as of Q2 2022, worth $42.5 million.
On August 10, Archer Aviation Inc. (NYSE:ACHR) said it is progressing in its commercialization efforts and proceeding the development and certification of the Midnight production aircraft. The company is also beginning efforts to make an early launch for its commercial operations. United Airlines Holdings, Inc. (NASDAQ:UAL) backs Archer Aviation Inc. (NYSE:ACHR)’s commercialization plan, as the company made a $10 million pre-delivery payment. Archer Aviation Inc. (NYSE:ACHR) stock has gained more than 13% over the last month as of August 23, and it can gain more by Q4 as the company works towards an early launch.
Deutsche Bank analyst Edison Yu on August 16 raised the price target on Archer Aviation Inc. (NYSE:ACHR) to $12 from $10 and maintained a Buy rating on the shares. After Q2 earnings from the eVTOL group, the analyst is increasingly confident that Archer Aviation Inc. (NYSE:ACHR) is “making fast and underappreciated progress” towards launching an eVTOL.
According to Insider Monkey’s database, 22 hedge funds were bullish on Archer Aviation Inc. (NYSE:ACHR) at the end of the second quarter of 2022, compared to 28 funds in the prior quarter. Sculptor Capital is the leading position holder in the company, with 2.90 million shares worth $28.5 million.
8. Fate Therapeutics, Inc. (NASDAQ:FATE)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 50.31%
Fate Therapeutics, Inc. (NASDAQ:FATE) is headquartered in San Diego, California, operating as a clinical-stage biopharmaceutical company. Fate Therapeutics, Inc. (NASDAQ:FATE) specializes in programmed cellular immunotherapies for cancer and immune disorders. In Q2 2022, Cathie Wood strengthened her hold on Fate Therapeutics, Inc. (NASDAQ:FATE) by 5%. Her ARK portfolio featured about 11.5 million shares of the company worth $265 million, representing 12.26% of the total securities. As of August 23, the stock is down about 50% year to date.
On August 18, Wells Fargo analyst Nick Abbott assumed coverage of Fate Therapeutics, Inc. (NASDAQ:FATE) with an Overweight rating but lowered the price target to $90 from $125. The analyst sees two main upcoming catalysts in Q4 with risk/reward profiles that are positively skewed for Fate Therapeutics, Inc. (NASDAQ:FATE). These include FT536/538’s solid tumor data at SITC with early responses that could result in a $10 per share upside, and updates for FT538 and FT516/596 in liquid tumors that might help elevate Fate Therapeutics, Inc. (NASDAQ:FATE) by $3 per share.
According to Insider Monkey’s data, 23 hedge funds were long Fate Therapeutics, Inc. (NASDAQ:FATE) at the end of June 2022, compared to 31 funds in the earlier quarter. Jeremy Green’s Redmile Group is the largest stakeholder of the company, with almost 13 million shares worth $321 million.
7. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 67.29%
Unity Software Inc. (NYSE:U) is a San Francisco-based company that operates an interactive real-time 3D content platform. Its platform is utilized by content creators, developers, artists, designers, engineers, and architects. ARK Investment Management added 12% to its existing Unity Software Inc. (NYSE:U) stake in Q2 2022. The fund owned more than 9 million shares worth $366.75 million in the June quarter.
Citi analyst Jason Bazinet on August 18 maintained a Buy rating on Unity Software Inc. (NYSE:U) but lowered the price target on the shares to $61 from $68. The analyst updated his model to factor in Unity Software Inc. (NYSE:U)’s Q2 results. He believes any of the potential transactions “are apt to be positive for Unity shareholders”. If the ironSource Ltd. (NYSE:IS) or AppLovin Corporation (NASDAQ:APP) transactions materialize, positive free cash flow will be achieved sooner, the analyst told investors in a research note. If an “interloper” other than ironSource or AppLovin acquires Unity Software Inc. (NYSE:U), shareholders stand to receive a takeover premium, said the analyst.
According to Insider Monkey’s data, 23 hedge funds were long Unity Software Inc. (NYSE:U) at the end of Q2 2022, compared to 39 funds in the earlier quarter. Silver Lake Partners is the biggest stakeholder of the company, with roughly 35 million shares worth $1.28 billion.
Here is what ClearBridge Investments All Cap Growth Strategy has to say about Unity Software Inc. (NYSE:U) in its Q1 2022 investor letter:
“We took advantage of a correction in higher-multiple stocks early in the first quarter to purchase shares of Unity Software (NYSE:U), a leading platform to create, run and monetize 3D content. With about 1.6 million monthly active creators versus roughly 15 million potential content creators in gaming alone, we believe the company’s Create Engine is still under penetrated relative to its core addressable market. We similarly see a long runway for growth in Unity’s Operate Solutions segment given its advertising network commands single-digit share of the $60 billion mobile app install ad market today. Furthermore, we believe Unity is well-positioned to expand its addressable market to include industries beyond gaming, on both the operate and create sides of their business (Exhibit 1). The company is not yet free cash flow positive but given strong net expansion rates and high gross margins, we see a path to improving profitability over time, with management notably targeting positive free cash flow this fiscal year.”
6. Schrödinger, Inc. (NASDAQ:SDGR)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 19.96%
Schrödinger, Inc. (NASDAQ:SDGR) is a New York-based company that offers a physics-based software platform, enabling the discovery of novel molecules for drug development and materials applications. Cathie Wood’s ARK Investment Management owns about 3 million shares of Schrödinger, Inc. (NASDAQ:SDGR) as of Q2 2022, worth $76.3 million, representing 1.04% of the total 13F securities. Piper Sandler analyst Do Kim on July 26 raised the price target on Schrödinger, Inc. (NASDAQ:SDGR) to $86 from $84 and kept an Overweight rating on the shares.
In Q2, the company reported a revenue of $38.5 million, up 29.2% year over year, outperforming market consensus by $3.02 million. Schrödinger, Inc. (NASDAQ:SDGR) reaffirmed its full-year 2022 guidance despite mixed Q2 results. The total revenue is expected to range from $161 million to $181 million, compared to a consensus of $175.39 million. This represents a 17% to 31% growth over 2021. For the third quarter of 2022, software revenue is projected to lie between $23 million to $25 million. The stock can potentially recover in Q4 as revenue grows, in both software and drug discovery segments.
According to Insider Monkey’s database, Schrödinger, Inc. (NASDAQ:SDGR) was part of 23 hedge fund portfolios at the end of Q2 2022, compared to 22 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the leading shareholder of the company, with approximately 7 million shares worth $184.3 million.
In addition to StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG), Schrödinger, Inc. (NASDAQ:SDGR) is one of the beaten down Cathie Wood stocks that can make a recovery soon.
Here is what Baron Growth Fund has to say about Schrödinger, Inc. (NASDAQ:SDGR) in its Q3 2021 investor letter:
“Schrodinger, Inc. is a hybrid biotechnology and technology company that uses molecular dynamics and free energy perturbations to model drug/target interactions for both third parties and its own internal efforts. Shares fell following second quarter financial results in which the company did not raise guidance and noted that revenue was weighted toward the fourth quarter. As we focus on company fundamentals and not these types of short-term issues, we remain shareholders.”
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Disclosure: None. 10 Cathie Wood Stocks that Can Rebound in Q4 is originally published on Insider Monkey.
