5 Best Stocks To Buy and Hold For 5 Years: Cathie Wood’s Picks

Below we presented the 5 best stocks to buy and hold for 5 years according to star investor Cathie Wood. For an extensive discussion and a more comprehensive list please see 10 Best Stocks To Buy and Hold for 5 Years.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the best stocks to buy and hold for 5 years:

5. CRISPR Therapeutics AG (NASDAQ:CRSP)

Cathie Wood had more than $700 million in CRSP at the end of September. That position is now worth more than $1.3 billion as CRSP shares skyrocketed in Q4. Renowned biotech investor billionaire Joe Edelman is also a huge CRSP fan with a $112 million position at the end of September.

CRSP is one of those stocks you have to buy and hold for the long-term as the stock didn’t do anything for investors since the middle of 2018 until the summer of 2020. Patient investors were rewarded as CRSP shares tripled in 2020. We believe there is still time to get into CRSP shares as this is a long-term play and the stock skyrocketed in 2020. Cathie Wood herself said that whenever things have gone this well for her, usually there’s a correction waiting around the bend. So, maybe investors should wait for a better entry point. 

4. Roku, Inc. (NASDAQ:ROKU)

ROKU ranks 4th in our list of the best stocks to buy and hold for 5 years. Wood had nearly $750 million invested in ROKU shares at the end of September. ROKU is a popular technology stock among hedge funds. There were 59 hedge funds with bullish ROKU bets at the end of September. Greenhaven Road Capital talked about ROKU in detail recently:

“ROKU (ROKU) – Roku is a position that has appreciated into the top 5, after starting as part of a basket of stocks in March. The share price has more than doubled since our purchases. Roku controls the home screen for tens of millions of televisions. In the same way that Digital Turbine monetizes the limited real estate of the cell phone, Roku monetizes the home screen of smart televisions. Roku has accomplished this by providing a purpose-built operating system to television manufacturers. Roku is built into 1 in 3 of the televisions sold in the United States and increasingly in Canada, England, Mexico, and Brazil. Because the operating system is purpose built for television, it is less resource demanding than alternatives such as Android. This allows for cheaper manufacturing and a cost advantage in the very margin-constrained television market. The net result is Roku adds users for less than $20 and does not tie up any capital in the manufacturing process.

Roku’s platform sits between the 43M active users and content, making money when used. They have an ad-supported Roku channel, earn revenue share on subscriptions to streaming services like Showtime, and get a slice of advertising inventory from traditional channels, such as Fox Sports, when streamed via their Roku platform.

Roku has consistently increased revenue per user, and last quarter was up to $24 (over a trailing 12 months). The increase in revenue per user has been a function of increased engagement and rising advertising rates. Last year, Roku purchased Dataxu, a company that helps clients enhance marketing and advertising efforts with data science, to make it easier for large advertisers to place ads. In my opinion, the growth of the user base is highly likely, as there will be a continuous upgrade to larger, better, and less expensive televisions. Roku benefits from cord cutting. There is currently a very large gap between the Roku operating system and the Samsung and Sony systems – it reminds me of the period when Nokia and Microsoft were hanging on to their mobile operating systems. With a growing user base, Roku has increasing negotiating power with content providers. Since the quarter ended, Comcast decided to put their Peacock streaming offering on Roku after resisting initially – just another sign of the increasing power of Roku. We have the opportunity for substantially growing the user base and revenue per user while consuming very little capital.”

3. Square Inc. (NASDAQ:SQ)

Cathie Wood can’t stop talking about Square’s cashapp. She had nearly $950 million invested in the stock at the end of September. Billionaire hedge fund managers Philippe Laffont’s and Stephen Mandel’s hedge funds also had around $900 million in SQ. Touch Stone Capital explained the bullish thesis on SQ in its Q1 investor letter:

“Square is a provider of innovative financial products for small-to-medium businesses (SMBs) and individual consumers. Software is replacing bank branches as the predominant distribution point for financial services, and the market segments where Square focuses— SMBs and consumers—are two groups that we view as most amenable to automation and digitization. Square’s SMB business pioneered the self-serve and software-enabled models for payment processing—enabling millions of SMBs to accept cards for the first time—and has since evolved into a suite of financial tools for SMB sellers to manage their operations. Square’s consumer-oriented Cash App grew from a project that created the U.S.’s first instant and direct bank-to-bank transfer service. Today, it has grown into a full-service, multiproduct consumer finance business. We believe its frictionless, low-cost offerings represent a strong value proposition for the 60 million U.S. adults currently unbanked or underbanked. We believe Square will sustain above-market volume growth via share gains and upmarket expansion, with margin expansion driven by sales & marketing and R&D efficiency.”

2. Invitae Corporation (NYSE:NVTA)

After Cathie Wood’s interview with Bloomberg, the shares of gene editing stocks like Editas Medicine (EDIT) and Intellia Therapeutics, Inc. (NTLA) popped even though these stocks weren’t among Cathie Wood’s top 10 holdings. Wood’s second large position, Invitae, which is a medical genetics company, didn’t see a similar bump in its shares at all. In fact, NVTA shares lost 20% of their value in December.

Cathie Wood had more than $1.2 billion invested in NVTA shares at the end of September. Healthcare hedge funds Baker Bros and Casdin Capital also had large positions in NVTA at the end of September. NVTA is intentionally losing a ton of money to undercut its rivals and become the “runaway leader in genetics across all areas of healthcare” by gathering a massive database of customer tests.

1. Tesla Inc. (NASDAQ:TSLA)

“We believe that Tesla will be in a poll position to dominate because of its advantages in artificial intelligence and the amount of data it has collected and the A.I. expertise that it has,” said Cathie Wood. According to her, Tesla’s battery technology was already three to four years ‘ahead‘ of the competition. Tesla has 15 billion miles of real world driving data collected and the next closest is Google with 25 million.

Tesla was the number one position in Cathie Wood’s portfolio at the end of September. Wood had 3.43 million shares of Tesla, accounting for 8.7% of her 13F portfolio. Those shares are now worth more than $2.4 billion, by far the biggest position in Wood’s portfolio. We published a ton of articles and shared both the bearish and bullish thesis on Tesla in the past. If Tesla wins the autonomous vehicle race, it will easily become the most valuable company on the planet.

Please also see 12 Best Large-Cap Biotech Stocks To Buy Now and 10 Best Tech Stocks To Invest In Right Now.

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Disclosure: None.