15 Best ARK Stocks To Buy Now

Published on October 31, 2023 at 5:20 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 15 best ARK stocks to buy now. To see more such companies, go directly to 5 Best ARK Stocks To Buy Now.

Cathie Wood’s flagship ARK Innovation ETF made a roaring comeback earlier this year when investors’ risk appetite increased and growth stocks rebounded. However, things have yet again started to go south for the ambitious investor since data shows investors pulled over $550 million from the fund since July 2023 highs. Despite huge losses Cathie Wood is sticking to her manta of innovation investing.

Is Innovation Investing a Weak Strategy?

A research paper titled “Investing in Innovation” published by Sparkline Capital talks in detail about the connection between investing in innovation and stock returns. The paper asks if innovation is always fruitful then why Cathie Wood’s hedge fund, which is famous for investing in innovation, is posting huge losses over the past year? The paper says that it’s a misconception to equate innovation investing with investing in expensive growth stocks. Innovation does not always mean that you invest in speculative stocks that are trading at a premium in the market. The paper also quotes Seth Klarman, who once said, “at the root of all financial bubbles is a good idea carried to excess.” The research paper also quotes some experts and analysts who believe that in history whenever there is a technological shift or progress, you will find some sort of speculation. The paper said that progress often “seduces” speculative investors. But it’s important to find a balance between core investing principles and the lure of progress and innovation. The paper also talks about a strategy it labels DARP – “disruption at a reasonable price.” The paper explains how the DARP strategy analyzes stocks using the example of Zoom, which has been a Cathie Wood favorite as she still owns a $710 million stake in the company.

“A pandemic winner, it was hit as the macro regime shied toward reopening. Zoomʼs stock price retreated to pre-pandemic levels, even though sales had climbed 7.5X over this period. Its -80% drop was due not to fundamental decline but to multiple compression. DARP did not hold Zoom. Despite the disruptive potential of remote work, DARP could not get comfortable with Zoomʼs astronomical valuation. It was a good miss. We want to own disruption at a reasonable price, not disruption at any price. Investing in innovation does not require YOLO’ing into speculative, hypergrowth stocks. Prudent value investors can also invest in innovation by following a DARP approach,” the research paper said.

For this article we scanned Cathie Wood’s Q2 portfolio and chose her top 15 stock picks.

Best ARK Stocks To Buy Now

15. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA)

Number of Shares Owned by ARK: 182,192,185

Stake Value: $329,767,854

Number of Hedge Fund Holders: 23

Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is not having a good time this year, having lost about 40% in value this year through October 24. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA)’s subsidiary Zymergen Inc. has filed for Chapter 11 bankruptcy in a Delaware court. In September, though, Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) jumped after the company said it, along with Texas A&M University, has been jointly awarded a US government grant to study the spread of the virus COVID-19 through animal species.

Cathie Wood’s ARK owned a $330 million stake in Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) as of the end of the second quarter of 2023.

14. CRISPR Therapeutics AG (NASDAQ:CRSP)

Number of Shares Owned by ARK: 7,163,118

Stake Value: $325,133,913

Number of Hedge Fund Holders: 30

CRISPR Therapeutics AG (NASDAQ:CRSP) ranks 14th in our list of the best ARK stocks to buy now. Cathie Wood’s ARK owns 7.16 million shares of CRISPR Therapeutics AG (NASDAQ:CRSP) as of the end of the second quarter. The total worth of these shares of the conclusion of June quarter was $325.13 million.

In September, Mizuho started covering CRISPR Therapeutics AG (NASDAQ:CRSP) with a Buy rating, citing the company’s potential to become next Genentech. The firm set an $82 price target on the stock.

13. Roblox Corporation (NYSE:RBLX)

Number of Shares Owned by ARK: 11,973,881

Stake Value: $346,763,605

Number of Hedge Fund Holders: 35

Roblox Corporation (NYSE:RBLX) stock jumped in late September after SoMA Partners Gil Simon said during an interview with CNBC that he thinks the stock could double. Here is what the analyst said:

“We think the next few years is a nice trajectory for them to increase those margins by as much as 300 basis points a year. We think next year will be an up year, this year will be the trough and we are looking out to 2025 and 2026 and we think those margins could be back into the 20s.”

Cathie Wood’s hedge fund ARK owns an $11.97 million stake in Roblox Corporation (NYSE:RBLX) as of the end of the second quarter of 2023.

Artisan Mid Cap Fund made the following comment about Roblox Corporation (NYSE:RBLX) in its second quarter 2023 investor letter:

“We initiated new GardenSM positions in Keysight, Roblox and Liberty Media Corp–Liberty Formula One during the quarter. Roblox Corporation (NYSE:RBLX) is an online platform that allows users to play games created by other users and to create their own games using the Roblox Studio, a robust suite of development and coding tools. The company’s model is similar to a social network in that user-generated content scales with user growth on the platform and benefits from viral adoption. While the graphics, user interface and general gameplay currently appeal more to younger people, Roblox is pursuing a strategy of investing heavily to accelerate its technological capabilities so that it can provide experiences that appeal to an older demographic. We believe the valuation is justifiable given the stickiness of the core platform (the average user spends 2.4 hours per day on Roblox), its attractive business model and a potential bull case where Roblox becomes a leading place to create and consume social 3D experiences for the general population.

Roblox is another (there are more) example of a company that is well-positioned to benefit from generative AI advancements. As discussed earlier, Roblox is a social gaming platform that relies on user-generated content. This content is enabled by the platform’s robustyet-simple tools for relatively novice developers. AI has the potential to turbocharge this tool set—with AI-assisted code building and generative artwork creation. Over time, this should enable a deeper pool of user-generated content that attracts an expanding set of game players.”

12. Unity Software Inc. (NYSE:U)

Number of Shares Owned by ARK: 11,477,199

Stake Value: $360,269,274

Number of Hedge Fund Holders: 30

Unity Software Inc. (NYSE:U) was in the news recently after the company appointed a new CEO and reaffirmed its Q3 outlook. Unity Software Inc. (NYSE:U) is scheduled to announce Q3 result on November 9.

Cathie Wood’s hedge fund ARK Invest owns a $360 million stake in Unity Software Inc. (NYSE:U). Unity Software Inc. (NYSE:U) has lost about 2% year to date through October 24. Overall, 30 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Unity Software Inc. (NYSE:U). The biggest stakeholder of Unity Software Inc. (NYSE:U) was Jim Davidson, Dave Roux and Glenn Hutchins’s Silver Lake Partners which had a $1.52 billion stake in the company.

White Brook Capital Partners made the following comment about Unity Software Inc. (NYSE:U) in its second quarter 2023 investor letter:

“Unity Software Inc. (NYSE:U): We took a trading position in Unity Software during the quarter. A trading position is one where I expect the duration of the investment to be relatively short at the time of investment. During the first quarter, I completed much of the work and viewed Unity as attractive based on valuation, but decided to pass. Behind that decision were fundamental questions around corporate governance and the probability that Apple, at the unveiling of their headset, would either go alone in providing tools for developers to produce content for their new augmented and virtual reality efforts or also announce a wide settlement with Unity’s primary competitor, Epic Games, of all outstanding legal matters and a new partnership. Instead, Unity is being relied upon to help developers. Due to continuing concerns around their incentive plan and the strength of the board, it is unlikely that the position will prove to be a multiyear holding, but they are very likely beneficiaries of growth in artificial intelligence and virtual reality in the short term.

Unity theoretically benefits from several trends coming together at once.

Augmented and virtual reality were unveiled too early, they’re not permanent busts. Artificial Intelligence advances should improve automation efforts that make it easier for developers to produce more intricate and complex environments and games in three-dimensional space. Improvements in chip development, notably Apple Silicon, but also by competitive chip manufacturers like NVidia and AMD, should also improve playback and interaction of three-dimensional worlds…”

11. Teladoc Health, Inc. (NYSE:TDOC)

Number of Shares Owned by ARK: 20,311,873

Stake Value: $377,597,727

Number of Hedge Fund Holders: 28

Teladoc Health, Inc. (NYSE:TDOC) ranks 11th in our list of the best ARK stocks as Cathie Wood owns a $377.6 million stake in the company. In July Teladoc Health, Inc. (NYSE:TDOC) posted second quarter results. GAAP EPS in the quarter came in at -$0.40, meeting estimates. Revenue in the period jumped 10.1% year over year to $652.4 million, beating estimates by $3.22 million.

Greenhaven Road Capital made the following comment about Teladoc Health, Inc. (NYSE:TDOC) in its Q3 2022 investor letter:

“At the end of last year and the beginning of this year, I sold two of our highest multiple holdings and invested in Teladoc Health, Inc. (NYSE:TDOC), believing that swapping out of the highest multiple holdings into a lower multiple holding would provide protection in the event of multiple compression. However, the reality is that the multiple compression on currently loss-making (unprofitable) companies has been severe regardless of starting multiple, and TDOC’s lower relative starting point afforded us far less protection than I expected. We are no longer shareholders today but continue to follow the business and may return someday given its market size, product portfolio, and valuation.”

10. Shopify Inc. (NYSE:SHOP)

Number of Shares Owned by ARK: 6,955,150

Stake Value: $379,542,555

Number of Hedge Fund Holders: 74

In late September, it was reported that Shopify Inc. (NYSE:SHOP) will become a shareholder in B2B retail marketplace Faire. As part of the deal, Shopify Inc. (NYSE:SHOP) will recommend Shopify merchants use Faire’s platform to find new wholesale customers.

Cathie Wood’s hedge fund owns a $379.5 million stake in Shopify Inc. (NYSE:SHOP) through 6.9 million shares of the company. Overall, out of the 910 hedge funds in Insider Monkey’s database, 74 hedge funds reported owning stakes in Shopify Inc. (NYSE:SHOP).

Shopify Inc. (NYSE:SHOP)’s management talked in detail about its guidance and future expectations during Q2 earnings call:

“We expect a headwind of approximately 300 basis points to 400 basis points of revenue growth in Q3, related to the lapping of our logistics businesses. This results in approximately 300 basis points to 400 basis points of tailwind to our gross margin rate compared to Q3 of last year. With that in mind, our expectations for the third quarter are as follows. First on revenue. We expect our third quarter revenue to grow at a low-20s percentage rate year-over-year, which translates into a year-over-year growth rate in the mid-20s when you adjust for the 300 basis points to 400 basis points headwind from the sale of our logistics businesses.

We anticipate pricing changes along with adoption of our Merchant Solutions products, led by Payments, will continue to drive our strong top line growth. Q3 gross margin percentage is expected to be approximately 2 percentage points to 3 percentage points higher than our Q2 2023 gross margin of 49.3%, driven by a full quarter of benefit from the sale of our logistics businesses and a full quarter of benefit from the pricing changes, We believe that our Q3 operating expenses will be flat to up slightly compared to our Q2 operating expense dollars of $818 million when excluding one-time items from Q2. Lower headcount and the removal of the logistics, operating expenses are expected to be counterbalanced by targeted increased investments in marketing and the impact of our standard employee compensation review cycle.”

Read the full earnings call transcript here.

RiverPark Large Growth Fund made the following comment about Shopify Inc. (NYSE:SHOP) in its Q2 2023 investor letter:

“Shopify Inc. (NYSE:SHOP): Shopify shares were a top contributor in the quarter following strong 1Q results and the announced divestiture of its logistics business. Gross Merchandise Volume (GMV) grew 15% year over year as e-commerce sales broadly rebounded and Shopify continued to take market share. Revenue grew 25% driven by increased merchant adoption of multiple products, especially Shop Pay. The company generated $86 million of free cash flow, up from a $46 million loss last year, and announced expectations to be free cash flow positive for each quarter for the rest of the year. The company had previously announced several cost savings plans, which are driving margin and free cash flow improvement, and now plans to divest its capital-intensive logistics arm. Faster growing revenue, lower operating expenses, and a less capital-intensive future were all cheered on by the market.

Last year, 10% of US retail e-commerce sales flowed through SHOP, second only to Amazon, and the company is still enjoying significant tailwinds as retail merchants of all sizes adopt SHOP’s software tools to display, manage and sell their products across a dozen different sales channels. We believe that the overall growth of e-commerce, combined with the development of new products and services, such as its digital wallet Shop Pay, should continue to drive revenue growth of more than 20% per year over the next several years, accompanied by re-acceleration of operating margin growth and FCF generation.”

9. Twilio Inc. (NYSE:TWLO)

Number of Shares Owned by ARK: 7,132,012

Stake Value: $417,436,649

Number of Hedge Fund Holders: 49

Cathie Wood’s ARK owns a $417 million stake in Twilio Inc. (NYSE:TWLO). Barclays recently named Twilio Inc. (NYSE:TWLO) along with some other stocks that the firm believes could see “softer” bookings in the third quarter.

Earlier this month, insider selling activity was seen around Twilio Inc. (NYSE:TWLO) as the company’s CFO Aidan Viggiano sold 6,337 shares of the company while President, Communications, Khozema Shipchandler sold 10,125 shares of the company.

Aristotle Atlantic Focus Growth Strategy made the following comment about Twilio Inc. (NYSE:TWLO) in its Q4 2022 investor letter:

“We sold Twilio Inc. (NYSE:TWLO) and thereby reduced our subsector weight in software. The company reported a decent third quarter, but disappointed on fourth quarter 2022, full year 2023, and long-term guidance. The company is seeing macroeconomic headwinds and a slowdown spreading from technology, social media and cryptocurrency to retail and e-commerce. The other negative disclosure and a driver of this gross margin “miss” was that Twilio’s software sales are not accelerating at the rate that we expected. We are disappointed with this lower topline and low operating margin improvement guidance. The business transformation is taking longer than expected, and there is the heightened possibility that the new software growth could be stifled by more formidable competition as Twilio has made too many missteps.”

8. Exact Sciences Corporation (NASDAQ:EXAS)

Number of Shares Owned by ARK: 6,280,931

Stake Value: $428,485,123

Number of Hedge Fund Holders: 45

Molecular diagnostics company Exact Sciences Corporation (NASDAQ:EXAS) ranks 8th in our list of the best ARK stocks to buy now. Cathie Wood’s hedge fund owns a $428 million stake in Exact Sciences Corporation (NASDAQ:EXAS). The biggest stakeholder of Exact Sciences Corporation (NASDAQ:EXAS) during this period was Catherine D. Wood’s ARK Investment Management which owns a $428 million stake in the company.

Baron Health Care Fund made the following comment about Exact Sciences Corporation (NASDAQ:EXAS) in its Q3 2023 investor letter:

“Exact Sciences Corporation (NASDAQ:EXAS) is a cancer diagnostics company whose flagship product is Cologuard, a stool-based screening test for colon cancer. The stock declined because financial results did not satisfy lofty expectations and there was a broader sell-off in the diagnostics stocks. We retain conviction in the investment, though we reduced the position size to manage risk ahead of privately held company Freenome’s clinical trial readout of a potentially competing blood-based screening test for colorectal cancer. We believe the screening market for colon cancer is vast, and management continues to build optionality by moving several liquid biopsy programs of their own through the pipeline.”

7. DraftKings Inc. (NASDAQ:DKNG)

Number of Shares Owned by ARK: 14,627,852

Stake Value: $430,643,954

Number of Hedge Fund Holders: 40

In September, JPMorgan upgraded DraftKings Inc. (NASDAQ:DKNG) to Overweight from Neutral. JPMorgan’s analyst Joseph Greff and team believes the current weakness in DraftKings Inc. (NASDAQ:DKNG) could be a buying opportunity.

“DKNG stands to benefit from a continued increase in market share from higher hold rates (driven by parlay mix and better risk/ trading) and improved loyalty (from brand recognition, trust, and product enhancements). Customer acquisition costs can continue declining as national scale is achieved and sales/marketing costs fall precipitously. These translate to better flow-through and rapid EBITDA margin expansion,” the analysts said.

Baron Discovery Fund made the following comment about DraftKings Inc. (NASDAQ:DKNG) in its Q1 2023 investor letter:

“We re-initiated a position in former Fund holding DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy sports operator. DraftKings’ mobile applications offer consumers the ability to wager on a wide variety of sporting events and play hundreds of real-money casino games. The company has spent the past three years building a proprietary technology stack that improves the customer experience and delivers best-in-class breadth of bet types (such as parlays, same-game parlays, and player props). State-level online sports betting (OSB) and iCasino legalization, along with a multi-year consumer adoption timeline in active states, has supported a 90% revenue growth rate for DraftKings since 2020. The opportunity for OSB legalization remains significant, with under 50% of the U.S. population currently having legal mobile sports betting. We expect 65% to 80% of the population will eventually have access to OSB. ICasino is currently legal in just seven states representing roughly 13% of the population. ICasino product adoption in legalized states has been robust, with the average user spending twice as much as a sports bettor. While the pace of legalization for iCasino has been slower, we believe additional states will pass regulation in the coming years.

As U.S. states began to legalize sports betting, the DraftKings management team moved quickly to build widespread brand awareness. DraftKings is the #2 operator in both OSB and iCasino by a wide margin, and has demonstrated improving market share trends across almost all states. When a new state legalizes sports betting, DraftKings has a first mover advantage as many of its customers are converted from the DraftKings daily fantasy sports offering. The quality of their sportsbook product along with increasingly targeted promotional spending results in strong customer retention and high lifetime values. In states where iCasino is legal, DraftKings can cross-sell OSB customers. DraftKings’ scale and product advantages are creating a flywheel that will enable the company to continue to out-invest the competition in acquisition marketing, retention, and research and development. The high barriers to entry are resulting in a consolidated industry that will eventually lead to a highly profitable business. This is evidenced by older-vintage state contribution margins that are already approaching 40%. Longer term, we believe DraftKings can generate EBITDA margins between 20% and 30% with strong free-cash-flow conversion.”

6. Block, Inc. (NYSE:SQ)

Number of Shares Owned by ARK: 10,887,114

Stake Value: $481,863,655

Number of Hedge Fund Holders: 66

Block, Inc. (NYSE:SQ) ranks 6th in our list of the best ARK stocks to buy now. Cathie Wood’s ARK owns a $482 million stake in Block, Inc. (NYSE:SQ) as of the end of the second quarter of 2023. Earlier this month Bank of America analyst Jason Kupferberg maintained a Buy rating on Block, Inc. (NYSE:SQ) shares, calling the recent pullback in stock price “unjustified.”

Cathie Wood owns a $481 million stake in Block, Inc. (NYSE:SQ) as of the end of the second quarter of 2023.

Here is what Baron Fintech Fund has to say about Block, Inc. (NYSE:SQ) in its Q2 2022 investor letter:

“Block, Inc. provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell due to mixed quarterly results with more modest growth in the Seller business offsetting strength in Cash App. While integration of recently acquired Afterpay is progressing well and credit metrics remain healthy, the buy-now-pay-later business slowed due to greater competitive intensity. We continue to own the stock due to Block’s long runway for growth, sustainable competitive advantages, and unique corporate culture.”

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