In this article, we discuss 10 software stocks to sell now according to Cathie Wood. If you want to skip our detailed analysis of these stocks, go directly to 5 Software Stocks to Sell Now According to Cathie Wood.
The market correction resulting from a surge in inflation and an imminent rise in interest rates has battered growth stocks. One of the most prominent casualties of this crisis has been Cathie Wood, the chief of ARK Investment Management, who has witnessed nearly all of the stocks in her portfolio trade in the red over the past few weeks. Latest 13F filings show that the portfolio value of her fund has decreased from $41 billion during the third quarter of 2021 to around $33 billion at the end of the fourth. Her flagship ARK Innovation ETF is also down over 30%.
ARK Investment Management was one of the biggest winners of the pandemic-fueled craze around high growth stocks. Wood has used the present lull around growth stocks to make significant changes to her portfolio. Between October and December, her fund made new purchases in 75 stocks and additional purchases in 90. It also reduced holdings in 190 stocks and sold off 13 stocks completely. Some of the sectors where most of the selling was done include biotech and software.
Some of the top software stocks that Wood sold during the fourth quarter of 2021 include Meta Platforms, Inc. (NASDAQ:FB), Zillow Group, Inc. (NASDAQ:Z), and Pinterest, Inc. (NYSE:PINS), among others discussed in detail below.
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of ARK Investment Management. The companies in which the fund trimmed a previously-held stake or sold it off completely feature on the list.
Data from around 900 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Cathie Wood of ARK Investment Management
Software Stocks to Sell Now According to Cathie Wood
10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 279
Percentage Decrease in Stake in Q4: 68%
Amazon.com, Inc. (NASDAQ:AMZN) is a Washington-based tech giant. The company has extensive interests in the cloud software business. It is one of the top tech stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Citadel Investment Group is a leading shareholder in Amazon.com, Inc. (NASDAQ:AMZN), with 4.1 million shares worth more than $13.9 billion.
Latest data shows that ARK owned 4,303 shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of the fourth quarter of 2021 worth $14.3 million, representing 0.04% of the portfolio. The company has been in the ARK portfolio since the first quarter of 2018.
Just like Meta Platforms, Inc. (NASDAQ:FB), Zillow Group, Inc. (NASDAQ:Z), and Pinterest, Inc. (NYSE:PINS), Amazon.com, Inc. (NASDAQ:AMZN) is one of the growth stocks affected by the market shift towards value plays.
In its Q1 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Amazon.com, Inc. (NASDAQ:AMZN) was one of them. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN):We sold our last remaining stake in Amazon this quarter. Amazon was our longest-running investment holding, after having originally purchasing it at the inception of Hayden in 2014, at a price of ~$317.
I gave some details of how Amazon.com, Inc. (NASDAQ:AMZN) has progressed over these past 6.5 years in last year’s Q2 2020 letter, which partners can find here (LINK). The company has executed amazingly well over this tenure, with revenues up ~3.3x and since our initial purchase, and reported operating income up ~30x over that period.
Generally, I believe there are three reasons to sell an investment:1) we recognize our initial thesis is wrong (sell out as quick as possible), 2) we have a significantly higher returning opportunity to redeploy the capital into (sell-down to fund the new investment), or 3) the company is maturing and hitting the top part of it’s S-curve / business lifecycle, so the business has fewer places to reinvest its capital internally. As such, the future returns will likely be lower than the past. This investment thus becomes a “source of capital” in the future, as we fund earlier-stage investment opportunities.
In the case of Amazon.com, Inc. (NASDAQ:AMZN), we decided to sell due to the third scenario. I’m sure Amazon will continue to generate value for shareholders and continue to keep pace with the broader technology sector. However, I’m just not confident it’s as attractive an investment as when we first invested.
With ~51% of US households having an Amazon Prime account (and with very low churn), each of these households continuing to increase their annual spend with Amazon, and few / no real competitors in sight, Amazon.com, Inc. (NASDAQ:AMZN) is a dominant force that will only continue to accrue value as consumers continue to move from offline to online purchases for their everyday needs. Likewise, the “cash-flow machine” of Amazon Web Services is in a similar position of strength, with AWS now having ~32% market share and continuing to grow at +30% y/y. Because of this, I think Amazon is probably one of the safest investments in the technology sector today.
So why did we decide to sell the investment then? Simply put, Amazon is …”(read the entire letter here)
9. Veeva Systems Inc. (NYSE:VEEV)
Number of Hedge Fund Holders: 45
Percentage Decrease in Stake in Q4: 72%
Veeva Systems Inc. (NYSE:VEEV) provides cloud-based software for the life sciences industry. Securities filings show that ARK owned 211,328 shares of Veeva Systems Inc. (NYSE:VEEV) at the end of December 2021 worth $53.9 million, representing 0.16% of the portfolio. The company has been in the ARK portfolio since the fourth quarter of 2020.
Hedge funds have been piling into Veeva Systems Inc. (NYSE:VEEV) stock as Wood sells it. At the end of the fourth quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Veeva Systems Inc. (NYSE:VEEV), up from 44 in the previous quarter worth $1.6 billion.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Veeva Systems Inc. (NYSE:VEEV) was one of them. Here is what the fund said:
“Veeva Systems Inc. (NYSE:VEEV) is a cloud software provider focused on the life sciences market. As its clients accelerated their digital transformation initiatives throughout the pandemic, Veeva achieved record new software bookings. The company’s shares fell during the quarter as more normalized demand trends dampened Veeva’s near-term growth trajectory. As digital tools drove efficiencies at pharmaceutical clients, they reduced the number of their sales representatives, which pressured Veeva’s seat-based-priced commercial business. We remain confident that Veeva Systems Inc. (NYSE:VEEV) will continue to benefit from the life sciences industry’s ongoing modernization initiatives by selling its innovative end-to-end software platform.”
8. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 110
Percentage Decrease in Stake in Q4: 72%
PayPal Holdings, Inc. (NASDAQ:PYPL) provides digital payments services. It is one of the most popular payment stocks on the market. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in PayPal Holdings, Inc. (NASDAQ:PYPL), with 14.4 million shares worth more than $2.7 billion.
Regulatory filings reveal that ARK owned 217,493 shares of PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of the fourth quarter of 2021 worth $41 million, representing 0.12% of the portfolio. The company has been in the ARK portfolio since the first quarter of 2018.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal Holdings, Inc. (NASDAQ:PYPL), which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
7. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 41
Percentage Decrease in Stake in Q4: 73%
Opendoor Technologies Inc. (NASDAQ:OPEN) owns and runs a digital real estate platform. Latest 13F filings show that ARK owned over 1.6 million shares of Opendoor Technologies Inc. (NASDAQ:OPEN) at the end of December 2021 worth $23 million, representing 0.07% of the portfolio. The firm has been in the ARK portfolio since the fourth quarter of 2020.
The hedge fund sentiment around Opendoor Technologies Inc. (NASDAQ:OPEN) is largely positive. At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Opendoor Technologies Inc. (NASDAQ:OPEN), up from 35 the preceding quarter worth $1.7 billion.
In its Q1 2021 investor letter, Baron Fund, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. (NASDAQ:OPEN) was one of them. Here is what the fund said:
“The sales of Opendoor Technologies Inc. (NASDAQ:OPEN) was a trim for position-sizing purposes after orders-of-magnitude type stock returns over the last year for these investments. We continue to believe the company is a disruptive innovator with open-ended long-term opportunities.”
6. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 55
Percentage Decrease in Stake in Q4: 74%
Cloudflare, Inc. (NYSE:NET) owns and runs a cloud platform. Hedge funds have been loading up on the stock in recent months. At the end of the fourth quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Cloudflare, Inc. (NYSE:NET), up from 50 in the previous quarter worth $958 million.
Latest 13F filings show that ARK owned 124,549 shares of Cloudflare, Inc. (NYSE:NET) at the end of December 2021 worth $16.3 million, representing 0.04% of the portfolio of the fund. The cloud firm has been in the ARK portfolio since the fourth quarter of 2020.
Alongside Meta Platforms, Inc. (NASDAQ:FB), Zillow Group, Inc. (NASDAQ:Z), and Pinterest, Inc. (NYSE:PINS), Cloudflare, Inc. (NYSE:NET) is one of the growth stocks on the radar of institutional investors.
In its Q4 2020 investor letter, Alger Mid Cap Focus Fund, an asset management firm, highlighted a few stocks and Cloudflare, Inc. (NYSE:NET) was one of them. Here is what the fund said:
“Cloudflare, Inc. (NYSE:NET) provides a broad range of network services to businesses of all sizes across the world. Cloudflare’s intelligent global network spans more than 200 cities in over 100 countries. It offers network security, performance and reliability to a growing portion of global web traffic. Today. over 15% of global internet requests go through Cloudflare, Inc. (NYSE:NET). Cloudflare’s serverless network design allows this global network to be a key component layer as new developments for edge computing. 5G and Internet of Things increase the importance of secure. reliable edge networks. Cloudflare stock outperformed in the fourth quarter following the announcement of Cloudflare One, a cloud-bas. network-as-a-service platform designed to replace the traditional enterprise network infrastructure. The Cloudflare One solution merges existing Cloudflare, Inc. (NYSE:NET) access and security solutions along with new enterprise-specific features into a unified Zero Trust network that can be managed through a single “pane of glass.” or display screen. With the rapid shift to remote work caused by the pandemic, this product increases Cloudflare’s potential for winning business from enterprise customers seeking to adapt to this new business environment.
While Cloudflare One adoption is still early. Cloudflare, Inc. (NYSE:NET) has already started to demonstrate an improved ability to sell to large customers. When discussing its third quarter results. Cloudflare said that it is continuing to sign up larger enterprise customers. including its first client to generate more than $10 million in annual recurring revenue. Cloudflare has just started to better monetize its more than 100.000 paying customer base. which along with continued product innovation, gives the company strong growth potential.”
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Disclosure. None. 10 Software Stocks to Sell Now According to Cathie Wood is originally published on Insider Monkey.
