In this article, we discuss the 5 worst stock picks of Cathie Wood. If you want to read our detailed analysis of these stocks, go directly to the 15 Worst Stock Picks of Cathie Wood.
5. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 37
Decline in Share Price in 2021: 78%
StoneCo Ltd. (NASDAQ: STNE) provides financial technology solutions. Amid a broader lull around growth stocks at the market, StoneCo Ltd. (NASDAQ: STNE) has suffered as well, leading to plenty of bearish calls on the stock. At the end of the third quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in StoneCo Ltd. (NASDAQ:STNE), compared to 44 the preceding quarter worth $2.7 billion.
However, the dip has served to embolden Wood, who has used it to buy even more shares of StoneCo Ltd. (NASDAQ: STNE). Latest filings reveal that ARK owned 1.8 million shares in StoneCo Ltd. (NASDAQ: STNE) worth $63 million at the end of September, an increase of 211% compared to filings for the second quarter.
In its Q2 2021 investor letter, JDP Capital Management, an asset management firm, highlighted a few stocks and StoneCo Ltd. (NASDAQ:STNE) was one of them. Here is what the fund said:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
4. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 62
Decline in Share Price in 2021: 80%
Peloton Interactive, Inc. (NASDAQ:PTON) provides interactive fitness products. There has been little change in ARK’s position on the company in recent months despite a sharp drop in the share price. At the end of September, the fund owned 1.7 million shares of Peloton Interactive, Inc. (NASDAQ:PTON) worth $149 million, representing 0.36% of the portfolio. ARK first bought a stake in the firm in late 2020 and has added to it significantly since.
Peloton Interactive, Inc. (NASDAQ:PTON) has won the backing of major hedge funds as it captures the fitness market. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Peloton Interactive, Inc. (NASDAQ:PTON) with 29 million shares worth more than $1 billion.
In its Q2 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Peloton Interactive, Inc. (NASDAQ:PTON) was one of them. Here is what the fund said:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
3. Chemomab Therapeutics Ltd. (NASDAQ:CMMB)
Number of Hedge Fund Holders: 3
Decline in Share Price in 2021: 81%
Chemomab Therapeutics Ltd. (NASDAQ:CMMB) operates as a biotech firm. Elite hedge funds have been attracted by the drug pipeline of the company in recent months. Among the hedge funds being tracked by Insider Monkey, New York-based firm OrbiMed Advisors is a leading shareholder in Chemomab Therapeutics Ltd. (NASDAQ:CMMB) with 2.5 million shares worth more than $28 million.
Chemomab Therapeutics Ltd. (NASDAQ:CMMB) is a new holding in the ARK portfolio. The fund purchased a stake in the company between June and September this year. The stake consists of 180,523 shares worth $2 million.
2. AquaBounty Technologies, Inc. (NASDAQ:AQB)
Number of Hedge Fund Holders: 6
Decline in Share Price in 2021: 83%
AquaBounty Technologies, Inc. (NASDAQ:AQB) is a biotech firm focused on the aquaculture industry. ARK owns more than 6 million shares in AquaBounty Technologies, Inc. (NASDAQ:AQB) worth over $25 million, representing 0.06% of the portfolio. The fund first bought a stake in the company in the first quarter of 2021, steadily increasing that position over the next few years. However, in 2021, Wood offloaded a portion of that stake in each of the first three quarters.
The hedge fund sentiment around AquaBounty Technologies, Inc. (NASDAQ:AQB) is not overly bullish either. At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $27 million in AquaBounty Technologies, Inc. (NASDAQ:AQB), up from 4 in the preceding quarter worth $41 million.
1. Berkeley Lights, Inc. (NASDAQ:BLI)
Number of Hedge Fund Holders: 18
Decline in Share Price in 2021: 88%
Berkeley Lights, Inc. (NASDAQ:BLI) is a digital cell biology company. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Berkeley Lights, Inc. (NASDAQ:BLI) with 1.1 million shares worth more than $23 million.
Even as Berkeley Lights, Inc. (NASDAQ:BLI) witnesses a steep decline in share price, Wood has remained bullish on the company. Filings for the third quarter of 2021 show that ARK increased its stake in the firm by 24% between June and September and now owns more than 8.5 million shares in Berkeley Lights, Inc. (NASDAQ:BLI) worth over $166 million, representing 0.39% of the portfolio.
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