In this article, we discuss the 5 best ARK stocks to buy now. If you want to read our detailed review of Cathie Wood’s stock picks and hedge fund performance, go directly to 12 Best ARK Stocks To Buy Now.
5. Roku, Inc. (NASDAQ:ROKU)
ARK Investment Management’s 13 Portfolio: 4.32%
ARK Investment Management’s Stake Value: $1.03 billion
Number of Hedge Fund Holders: 34
Up next in the portfolio of Cathie Wood is Roku, Inc. (NASDAQ:ROKU). The California-based company provides smart TV software which allows users to access multiple content sources within a single platform. ARK Investment Management, according to its Q1 portfolio, held 8.27 million Roku shares valued at $1.03 billion, making it the most prominent shareholder of the firm. In total, 34 hedge funds were long Roku, Inc. (NASDAQ:ROKU) at the end of March, down from 43 a quarter ago.
On April 28, Roku, Inc. (NASDAQ:ROKU) reported its Q1 earnings and posted an EPS of -$0.19, above analysts’ estimates by $0.02. The company pulled in $733.7 million in revenue for the quarter, which exceeded market forecasts by $15.1 million and also signalled year-on-year growth of 27.8%.
Citi analyst Jason Bazinet on May 3 maintained a ‘Buy’ rating on Roku, Inc. (NASDAQ:ROKU) shares and slashed the price target to $175 from $225. He sees the market as less bullish on streaming companies after Netflix reported subscriber loss for the first time in a decade, but thinks Roku, Inc. (NASDAQ:ROKU) is well-positioned to benefit from the secular trend of ad money moving from linear to connected TVs.
Here is what investment firm RGA Investment Advisors had to say about Roku, Inc. (NASDAQ:ROKU) in its Q4 2021 investor letter:
“Since we bought Roku, no stock has contributed more to our returns and no stock has been more volatile in our portfolio. This is now our third drawdown in the stock of over 30% and our second of over 60%. Fortunately (or tactically) before the two 60% drawdowns we had trimmed our positions by at least a third, though unfortunately that meant we still held large slices of the stock on the way down. Despite the stock having soared too far, too fast and thinking it was due for a period of digestion, we believe over our timeframe even the former highs will be rewarded with a good result. We have often pointed out that volatility in companies like Roku is the market’s way of grappling with a really wide range of potential outcomes and that remains as true today as ever, though the range of outcomes continues to narrow for the better for Roku.
Roku today is trading at lower multiples than at any point as a public company, meanwhile its revenue and margin composition has evolved from majority hardware to vast majority platform– in other words, each $1 of revenue is much more valuable today than ever before for Roku. Roku today is a profitable company for the first time in its history. Roku today has a multitude of investment opportunities within its own platform that can drive considerable value. Early in 2021 at higher prices, one had to believe the company would grow accounts internationally to justify valuations. This was so, because the company has so quickly achieved substantial penetration of the US market with 56.4m reported household customers of the ~130m total US households, that further growth in the US household count will be challenging and because prices were so high. Today, one merely needs to believe that with around 60 million households (the expectation for the yet reported year-end 2021 number), ARPU has a strong enough growth tailwind to reach $100 within a reasonable time, without relying on any incremental account growth. For context, as of Q3 this year, ARPU was $40, up 49% year-over-year and we know it will be higher in Q4. Growth in ARPU is underpinned by the continuing migration of viewer hours to CTV. The subforces behind this are increasing the penetration of Roku devices within households (go from one Roku to TV to 2-4), increasing the hours that each house watches (getting from shy of 4 hours to the nearly 8 hours an average American household watches TV) and broadening the content on the platform, increasing the share of inventory with content companies and more hours (like live sports viewing) shifting from linear to CTV. We further believe the opportunity to become the bundler and/or hub of household content subscriptions is growing, as evidenced by the rise in credit card pings per user from 1 to 1.3 per month and its continuing ascension. In this respect, Roku has the right to win with their installed base, because the experience is exponentially better than legacy and competing offerings…” (Click here to see the full text)
4. Block, Inc. (NYSE:SQ)
ARK Investment Management’s 13 Portfolio: 4.7%
ARK Investment Management’s Stake Value: $1.12 billion
Number of Hedge Fund Holders: 84
Block, Inc. (NYSE:SQ) provides fintech services through its subsidiaries: Cash App, TIDAL, Square and Spiral. At the end of the first quarter, 84 hedge funds reported ownership of stakes in the company, as compared to 96 hedge funds in the previous quarter. Wood’s ARK Investment Management was the firm’s largest Q1 shareholder, with a $1.12 billion stake.
On May 23, Truist analyst Andrew Jeffrey maintained a ‘Buy’ rating on Block, Inc. (NYSE:SQ) shares, and lowered the price target to $145 from $165. The analyst feels Block can become one of the globe’s leading fintech firms, giving competition to big names such as Visa (NYSE:V). He sees an attractive buying opportunity for long-term investors, given that the market has a poor understanding of the company’s business fundamentals.
Investment firm Farrer Wealth Advisors talked about Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter. The fund said:
“Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”
3. Coinbase Global, Inc. (NASDAQ:COIN)
ARK Investment Management’s 13 Portfolio: 5.53%
ARK Investment Management’s Stake Value: $1.32 billion
Number of Hedge Fund Holders: 46
Coinbase Global, Inc. (NASDAQ:COIN) ranks among the world’s leading cryptocurrency trading platforms. Disruptive tech investor Cathie Wood is long-term bullish on cryptocurrency as a whole, and increased her stake in Coinbase Global, Inc. (NASDAQ:COIN) by 29% in the first quarter of 2022, making her the firm’s largest shareholder with a $1.32 billion position.
Coinbase Global, Inc. (NASDAQ:COIN) reported below expectations results for the first quarter, as cryptocurrency prices experienced a colossal drop in recent months. Its EPS came in below estimates by $2.17, while quarterly revenue also missed forecasts by roughly $310 million.
Cowen analyst Stephen Glagola on May 26 initiated coverage of Coinbase Global, Inc. (NASDAQ:COIN) with an ‘Outperform’ rating and a price target of $85, noting that the company was “built to last.” He believes it can grow at a double-digit compound annual growth rate (CAGR) for “the foreseeable future”, and holds that its regulatory adherence and security infrastructure provide a structural advantage over global competitors.
Out of the 900+ elite hedge funds tracked by Insider Monkey, Coinbase Global, Inc. (NASDAQ:COIN) shares were held by 46 hedge funds at the close of the first quarter. This shows a negative trend from the quarter before where 57 hedge funds were shareholders of the cryptocurrency platform.
Longleaf Partners Fund, an investment firm, mentioned Coinbase Global, Inc. (NASDAQ:COIN) in its Q4 2021 investor letter. It said:
“We also have seen plenty of IPO/SPAC craziness showing both that private players need public markets more than they admit and that there is more volatility embedded in these newer companies than a private quarterly mark might admit. As for how efficient both the private and public markets are, we would encourage you to really delve into some of those multi-hundred-page S1s for many of the newest public companies to see the huge gap between the last valuation at which the company was funded and/or granted shares to its executives and the often much higher price at which the company went public – Coinbase is a prime example.”
2. Teladoc Health, Inc (NYSE:TDOC)
ARK Investment Management’s 13 Portfolio: 5.86%
ARK Investment Management’s Stake Value: $1.40 billion
Number of Hedge Fund Holders: 36
Teladoc Health, Inc (NYSE:TDOC) provides virtual healthcare services in the United States. It ranks as ARK Investment Management’s second largest holding, representing 5.86% of its total portfolio with a $1.4 billion stake.
36 hedge funds held positions worth $1.96 billion in Teladoc Health, Inc (NYSE:TDOC) at the end of Q1 2022. This is in comparison to 39 hedge funds with $2.45 billion worth of stakes in the company a quarter ago.
Oppenheimer analyst Michael Wiederhorn noted on May 26 that he continues to favor Teladoc Health, Inc (NYSE:TDOC) in the telehealth segment as a high risk/reward opportunity, and believes recent government policies will promote usage of telehealth in the long term. A bipartisan group of US senators have recently introduced legislation that would remove Medicare’s requirement for in-person visits before telehealth visits for mental services, a move that will boost the telehealth industry and improve transparency.
Investment firm RiverPark Funds talked about the market position of Teladoc Health, Inc. (NYSE:TDOC) in its Q1 2022 investor letter, stating:
“Teladoc is the largest telehealth provider in the US and has recently begun to expand internationally. TDOC’s platform enables an ever-expanding list of patient-doctor interactions (including those for primary health care, mental health issues and chronic condition management) to transition from an on-site visit to one that can be done remotely with full video- based interaction. TDOC provides its platform of services on both a business-to-business and direct-to-consumer basis, through monthly subscription-based relationships. For its core business-to-business clients, the company contracts with a wide range of entities, including large scale employers (the company currently contracts with over 50% of the Fortune 500), health plans, health systems, and medical insurance companies, which currently cover more than 50 million members. For these customers, the company provides a win-win-win, as patients spend no time traveling and less time waiting, doctors are more efficient seeing more patients in less time, and payers (employers and plan sponsors) save money while being able to offer a highly popular additional benefit for their employees. This B to B market is projected to be a +$100 billion market opportunity and TDOC is the clear global market leader. For its direct-to- consumer clients, the company provides a growing suite of services for individuals to have affordable access to on-demand and scheduled medical services, for which their current insurance does not provide reimbursement (such as extended mental health counseling).
Although the company has been growing steadily for well over a decade, the business has transformed over the past few years as the COVID pandemic caused a significant increase in the demand for virtual healthcare. In addition, the company’s 2020 acquisitions of Livongo, the leader in virtual chronic condition management, and InTouch a competitive telehealth platform, materially broadened the company’s product offerings. At its recent analyst day, management guided to 25-30% top line growth for each of the next three years, exiting 2024 with more than $4 billion in annual revenue. The company also anticipates expanding margins by 100-150 basis points per year in each of the next three years, while still accelerating its investments in marketing and R&D. As with many of our recent purchases, we took advantage of the decline in the company’s shares (down a breathtaking 70% from its 2021 high of almost $300 per share) to establish a small position in Teladoc.”
1. Tesla, Inc. (NASDAQ:TSLA)
ARK Investment Management’s 13 Portfolio: 7.17%
ARK Investment Management’s Stake Value: $1.71 billion
Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) makes and sells electric vehicles and battery storage solutions in the United States, China, Germany and around the world. The company has been a long-term holding of Cathie Wood, who stands as one of the earliest investors in the now $786 billion company.
80 hedge funds from the database of Insider Monkey reported bullish bets on Tesla, Inc. (NASDAQ:TSLA) at the close of Q1 2022, with aggregate holdings worth $11.28 billion. This shows a negative trend from the preceding quarter where 91 hedge funds were stakeholders in the EV maker. The stock has lost 36.69% in the year to date as of May 27, on the back of supply chain issues in its key market of China, and nervous market sentiment around founder Elon Musk’s $44 billion bid to buy Twitter.
On May 24, Daiwa analyst Jairam Nathan maintained an ‘Outperform’ rating on Tesla, Inc. (NASDAQ:TSLA) shares, and lowered the price target to $800 from $1,150. The company’s revenue for the first quarter stood at $18.76 billion, signaling strong growth of 80.54% over the same period last year, and beating market estimates by $917.8 million. EPS also came in above analysts’ forecasts by $0.95.
Baron Funds, an investment firm, discussed Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter. Here’s what the fund said:
“During the first quarter, we bought back shares in Tesla, Inc., which designs, manufactures, and sells electric vehicles, solar products, energy storage solutions, and batteries. We believe that despite the run in the stock over the last few years, Tesla presents a favorable risk/reward profile and remains a Big Idea with only about 1% market share of the automotive market. Since we bought the stock during the first quarter, shares increased 27.1%, despite a complex supply-chain environment, on continued revenue growth and record profitability. Robust demand and operational optimization allow the company to offset inflationary pressures while vertical integration provides flexibility around supply bottlenecks. Moreover, we expect new localized manufacturing capacity to drive additional efficiencies while software initiatives, including the autonomous driving program, are accelerating, offering valuable optionality to the stock.”
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