In this article, we discuss 10 innovative stocks in Cathie Wood’s portfolio that failed to impress. If you want to skip our detailed analysis of these stocks, go directly to 5 Innovative Stocks in Cathie Wood’s Portfolio That Failed to Impress.
Innovative stocks are companies that develop and harness new technologies, allowing for the revolutionization of work, catering to digital commerce, and working in the field of genomics, to name a few. Cathie Wood of ARK Investment Management is known for focusing her investments on disruptive innovation, and her hedge fund owns stocks from the information technology, healthcare, finance, consumer discretionary, and communications sectors.
The Florida-based ARK Investment Management has a 13F portfolio worth $33 billion as per the regulatory filings from Q4 2021, down from $41.6 billion in the prior quarter. Due to heavy market sell-off, ARK Innovation ETF slipped 30% for the year, as compared to a 9% decline for the S&P 500. Wood strongly believes that the losses suffered by her flagship funds are temporary at best, and investors cashing out at this time risk losing out on lucrative opportunities permanently. Cathie Wood is of the opinion that her fund will rebound in the next five years.
Cathie Wood has been the talk of the Wall Street, as investors continue to lose confidence in her portfolio, which has underperformed Invesco QQQ, the fund that tracks the Nasdaq 100, by 40% since the start of 2018. Some consider the ARK Innovation ETF to be riskier than Bitcoin. Apart from innovative stocks that failed to impress in Cathie Wood’s Q4 portfolio, some of the most notable holdings included Tesla, Inc. (NASDAQ:TSLA), Pfizer Inc. (NYSE:PFE), and JD.com, Inc. (NASDAQ:JD).
Our Methodology
We selected 10 innovative stocks from Cathie Wood’s Q4 portfolio that failed to impress, with stock prices declining by over 50% in the last six months. We have also mentioned the hedge fund sentiment around each stock, which was gauged from a total of 924 elite funds tracked by Insider Monkey in the fourth quarter of 2021.
Cathie Wood of ARK Investment Management
Innovative Stocks in Cathie Wood’s Portfolio That Failed to Impress
10. Pacific Biosciences of California, Inc. (NASDAQ:PACB)
Number of Hedge Fund Holders: 21
Decline in Share Price in the Last 6 Months: 60.29%
Pacific Biosciences of California, Inc. (NASDAQ:PACB) is an American biotechnology company that uses single-molecule real-time gene sequencing, with therapeutic focus areas including rare diseases, pharmacogenomics, neurogenomics, and immunogenomics.
In the last six months, Pacific Biosciences of California, Inc. (NASDAQ:PACB) stock declined 60.29%. Despite underperformance, Cathie Wood increased her stake in the company by 17% in Q4 2021, holding 26.3 million shares worth roughly $540 million. Pacific Biosciences of California, Inc. (NASDAQ:PACB) has featured on Cathie Wood’s portfolio consistently since Q3 2019, whereas her fund first purchased shares of the company in Q1 2018.
On February 15, Pacific Biosciences of California, Inc. (NASDAQ:PACB) reported its Q4 results, posting a loss per share of $0.30, missing estimates by $0.01. Revenue for the period came in at $36.02 million, exceeding market consensus by $19,000.
Canaccord analyst Kyle Mikson on February 16 lowered the price target on Pacific Biosciences of California, Inc. (NASDAQ:PACB) to $40 from $45 and kept a Buy rating on the shares. He believes the recent pull-back and any weakness related to the initial 2022 outlook presents a highly attractive buying opportunity in Pacific Biosciences of California, Inc. (NASDAQ:PACB) and recommends long-term investors accumulate shares at current levels.
Among the hedge funds tracked by Insider Monkey in Q4 2021, 21 funds were bullish on Pacific Biosciences of California, Inc. (NASDAQ:PACB), down from 27 funds in the prior quarter. SB Management owned a prominent stake in Pacific Biosciences of California, Inc. (NASDAQ:PACB), with 8.15 million shares worth $166.8 million.
Cathie Wood stands by her Pacific Biosciences of California, Inc. (NASDAQ:PACB) stake despite underperformance, in addition to owning significant positions in Tesla, Inc. (NASDAQ:TSLA), Pfizer Inc. (NYSE:PFE), and JD.com, Inc. (NASDAQ:JD).
Here is what DEVON Equity Management has to say about Pacific Biosciences of California, Inc. (NASDAQ:PACB) in its Q2 2021 investor letter:
“As a final word on Sequencing – we established a position in Pacific Biosciences (PACB US) during the quarter. PacBio is the leader in Long Read Sequencing (Illumina is dominant in Short Read). The Long Read market is far less developed than short read, but our continued research into the genomic sequencing field increased our confidence in the commercial viability for Long Read Sequencing in the coming years. We will discuss the investment case for PacBio in more detail in a future letter.”
9. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 24
Decline in Share Price in the Last 6 Months: 75.22%
Headquartered in Menlo Park, California, Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services company that offers a mobile application to users for trading stocks, exchange-traded funds, and cryptocurrencies.
Although Robinhood Markets, Inc. (NASDAQ:HOOD) declined 75.22% in the past six months, Cathie Wood loaded up on the stock in the fourth quarter of 2021. Wood’s ARK Investment Management elevated its position in the company by 142%, with 23.8 million shares worth $423.5 million.
On January 27, Robinhood Markets, Inc. (NASDAQ:HOOD) reported its fourth quarter results, posting a loss per share of $0.49, missing estimates by $0.19. Revenue over the period came in at $362.71 million, missing market consensus by approximately $15 million. Robinhood Markets (NASDAQ:HOOD) stock slid 11% in after-hours trading after the company said it expects Q1 2022 revenue will be less than $340 million versus consensus of $438.7 million.
Deutsche Bank analyst Brian Bedell raised the price target on Robinhood Markets (NASDAQ:HOOD) on February 18 to $14 from $12 and kept a Hold rating on the shares. The analyst issued a mid-Q1 outlook for the brokers and asset managers and continues to favor the “rate-sensitive stocks” for at least the next two quarters.
Joshua Kushner’s Thrive Capital is the biggest shareholder of Robinhood Markets, Inc. (NASDAQ:HOOD) as of Q4 2021, with 20.4 million shares worth $362.4 million. Overall, 24 hedge funds were bullish on the stock at the end of December 2021.
Here is what Claret Asset Management has to say about Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2021 investor letter:
“Robinhood went public at $38 a share at the end of July of this year. After a one day decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that the company does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, it is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
8. CRISPR Therapeutics AG (NASDAQ:CRSP)
Number of Hedge Fund Holders: 34
Decline in Share Price in the Last 6 Months: 51%
CRISPR Therapeutics AG (NASDAQ:CRSP) is one of the innovative stocks held by ARK Investment Management that underperformed in the last six months, falling 51%. Cathie Wood boosted her stake in CRISPR Therapeutics AG (NASDAQ:CRSP) by 20% in Q4 2021, holding over 9 million shares worth $688.6 million. CRISPR Therapeutics AG (NASDAQ:CRSP) is an American biotech company using gene editing to develop pharmaceutical drugs.
CRISPR Therapeutics AG (NASDAQ:CRSP) posted on February 15 its Q4 results, announcing a loss per share of $1.84, behind market consensus estimates by $0.06. The $12.90 million revenue outperformed estimates by $10.64 million.
RBC Capital analyst Luca Issi on February 16 lowered the price target on CRISPR Therapeutics AG (NASDAQ:CRSP) to $95 from $117 and kept a Sector Perform rating on the shares. The analyst stated that while Q4 earnings were “uneventful”, he is lowering his price target to reflect the company’s higher R&D. He added that despite the material pullback in CRISPR Therapeutics AG (NASDAQ:CRSP) shares of 51% over the past six months and the stock’s “much more attractive valuation”, he remains on the sidelines, noting that other competitors are “better positioned” in oncology.
EcoR1 Capital held a prominent position in CRISPR Therapeutics AG (NASDAQ:CRSP) in Q4 2021, with over 1 million shares worth $81.6 million. Overall, 34 hedge funds were bullish on the stock in the fourth quarter of 2021.
7. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 35
Decline in Share Price in the Last 6 Months: 77.35%
StoneCo Ltd. (NASDAQ:STNE) is a company that provides cloud-based financial technology solutions to enable electronic commerce. Despite underperformance in the last six months, Cathie Wood increased her stake in StoneCo Ltd. (NASDAQ:STNE) by 53% in Q4 2021, holding 2.7 million shares worth $46.7 million.
On February 18, Evercore ISI analyst Sheriq Sumar assumed coverage of StoneCo Ltd. (NASDAQ:STNE) with an In Line rating and a price target of $14, down from $30. The analyst’s lower estimates and target price are due to rising rates in Brazil that will negatively pressure net margins. However, a secular tailwind of cash-to-card in Brazil is still strong and StoneCo Ltd. (NASDAQ:STNE) is positioned for continued share gains, the analyst added.
A total of 35 hedge funds in the fourth quarter database of Insider Monkey held long positions in StoneCo Ltd. (NASDAQ:STNE), down from 37 funds in the quarter earlier. Tybourne Capital Management held a significant stake in StoneCo Ltd. (NASDAQ:STNE), with 5.76 million shares worth $97.2 million.
In addition to Tesla, Inc. (NASDAQ:TSLA), Pfizer Inc. (NYSE:PFE), and JD.com, Inc. (NASDAQ:JD), StoneCo Ltd. (NASDAQ:STNE) is a top pick of Cathie Wood despite recent underperformance.
Here is what Nordstern Capital has to say about StoneCo Ltd. (NASDAQ:STNE) in its Q4 2021 investor letter:
“StoneCo Ltd (Stone) was a darling of the 2020 stock market, but in 2021 the stock price dropped more than 80% from $95.12 to $16.86 at year-end. Everybody (and their tax-loss selling mother) hated it. The Brazilian fintech Stone is stewarded by André Street, one of the youngest billionaire founders, and has earned the trust of long-term owners such as the Walton family and Warren Buffett. Its clients are primarily SMBs and I believe Stone has Brazil’s best boots-on-the-ground hyper-local hyper-energized sales force…” (Click here to see the full text)
6. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 43
Decline in Share Price in the Last 6 Months: 60.34%
Roku, Inc. (NASDAQ:ROKU) is a California-based company that designs multiple digital media players for video streaming. Roku, Inc. (NASDAQ:ROKU) is also involved in the advertising business. The stock declined 60.34% over the last six months.
Featuring in ARK Investment Management’s portfolio since Q2 2019, the hedge fund boosted its position in Roku, Inc. (NASDAQ:ROKU) in Q4 2021 by 27.35%, holding more than 6 million shares valued at $1.3 billion. The stock represents 4.16% of Cathie Wood’s fourth quarter portfolio.
In its Q4 results, published on February 17, Roku, Inc. (NASDAQ:ROKU) reported earnings per share of $0.17, surpassing estimates by $0.13. The $865.33 million revenue jumped 33.15% year-on-year, missing market consensus by $28.47 million.
On February 22, Citi analyst Jason Bazinet lowered the price target on Roku, Inc. (NASDAQ:ROKU) to $250 from $275 and kept a Buy rating on the shares. The company reported a “broadly positive” Q4, but weaker guidance for Q1 and fiscal 2022 led to a negative reaction in the shares, Bazinet told investors in a research note.
Atreides Management is a prominent shareholder of Roku, Inc. (NASDAQ:ROKU), owning 539,765 shares worth over $123 million. Overall, the number of long hedge fund positions in Roku, Inc. (NASDAQ:ROKU) declined to 43 from 57 during October and December 2021.
Here is what Artisan Mid Cap Fund has to say about Roku, Inc. (NASDAQ:ROKU) in its Q4 2021 investor letter:
“Roku’s active account growth slowed for the fourth straight quarter after a very strong 2020. Consumers’ TV viewing patterns are normalizing post the most intense phase of the pandemic, and supply chain pressures among the company’s OEM partners have put upward pressure on TV prices and negatively impacted sales. One notable bright spot remains Roku’s solid progress in monetizing viewership as it attracts more advertising onto its platform. That said, viewership growth is a key input to Roku’s long-term growth outlook, and we continue to monitor the aforementioned headwinds to determine when growth will reaccelerate. Based on the likelihood that a meaningful portion of the $60bn-$70bn of traditional TV advertising market will migrate to connected TV platforms in the coming years, we have maintained our modestly sized position during this period of tempered viewership growth.”
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Disclosure: None. 10 Innovative Stocks in Cathie Wood’s Portfolio That Failed to Impress is originally published on Insider Monkey.
