In this article, we discuss the top 10 stock picks from the ARK Invest stock portfolio. If you want to see more stocks in this selection, check out ARK Invest Stock Portfolio: Top 5 Picks.
ARK Investment Management’s Cathie Wood wrote an open letter to the central bank on October 10, saying that the Federal Reserve is mistaken in its aggressive stance against inflation. Instead of focusing on employment and price indexes from past months, the Fed should look towards commodity prices as economic indicators. Commodity prices suggest that the US economy is barreling towards deflation, which should be the bigger concern rather than inflation, as per Wood. She said in the open letter:
“The Fed seems focused on two variables that, in our view, are lagging indicators – downstream inflation and employment – both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates. ”
While CPI rose 0.1% in August and was up 8.3% year-over-year and the unemployment rate fell to 3.5% in September, Cathie Wood reiterated that declining prices for commodities such as lumber and copper, as well as the housing slump, are narrating a different story. She criticized the rate hikes by the Fed, noting that the risk of deflation is running high. In her letter, she wrote:
“Could it be that the unprecedented 13-fold increase in interest rates during the last six months – likely 16-fold come November 2 – has shocked not just the US but the world and raised the risks of a deflationary bust?”
Cathie Wood owns multiple ETFs under the ARK umbrella and manages more than $14 billion in client money. She has always appreciated innovative and disruptive growth names, and to navigate the current macro environment, some of the top stocks in the Cathie Wood stock portfolio include Tesla, Inc. (NASDAQ:TSLA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Roku, Inc. (NASDAQ:ROKU).
Cathie Wood of ARK Investment Management
Our Methodology
We selected the top stock picks of Cathie Wood’s ARK Invest portfolio as of the end of the third quarter of 2022 for this analysis. The securities are ranked according to Wood’s stake value in each holding.
Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022 was used to assess the hedge fund sentiment around the securities.
ARK Invest Stock Portfolio: Top Picks
10. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 29
Coinbase Global, Inc. (NASDAQ:COIN) is an American company providing financial infrastructure and technology for the crypto economy. In the third quarter of 2022, the Cathie Wood stock portfolio featured 7.71 million shares of Coinbase Global, Inc. (NASDAQ:COIN) worth close to $498 million, representing 3.46% of the total portfolio. Cathie Wood has owned a position in Coinbase Global, Inc. (NASDAQ:COIN) since Q2 2021.
On October 11, JMP Securities analyst Devin Ryan maintained an Outperform rating on Coinbase Global, Inc. (NASDAQ:COIN) but lowered the price target on the shares to $155 from $195 as part of a broader research note on Investment Banks & Brokers, Asset Managers, and Financial Technology. The analyst added that the changes to his estimate factor in ongoing weakness in the operating environment in Q3 2022, but his longer-term forecasts are only slightly changed despite the shifting macro environment.
According to Insider Monkey’s data, 29 hedge funds were bullish on Coinbase Global, Inc. (NASDAQ:COIN) at the end of the second quarter of 2022, compared to 46 funds in the prior quarter. Jim Simons’ Renaissance Technologies is a prominent stakeholder of the company, with 4.25 million shares worth $200 million.
In addition to Tesla, Inc. (NASDAQ:TSLA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Roku, Inc. (NASDAQ:ROKU), Coinbase Global, Inc. (NASDAQ:COIN) is one of the top stocks in Cathie Wood’s portfolio.
In its Q2 2022 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Coinbase Global, Inc. (NASDAQ:COIN) was one of them. Here is what the fund said:
“Coinbase Global Inc. Ordinary Shares (NASDAQ:COIN) fell during the quarter as the crypto markets continued to suffer. While the company reported disappointing results, it committed to capping EBITDA losses at $500M even in the event of “a prolonged market downturn”. COIN’s ample liquidity ($6b in cash on hand) should enable them to survive a prolonged “crypto winter” and invest to strengthen the business in the downturn. While the crypto market is early in its adoption, Coinbase is focused on building the platform for crypto not only supporting trading, and cold storage, but moving into NFTs, staking, and crypto derivatives. We see tremendous upside potential for COIN over the next decade if they are able to successfully execute on their platform strategy.”
9. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 72
Block, Inc. (NYSE:SQ) is a California-based multinational technology conglomerate that offers financial services, as well as mobile payment and point of sale products. The Cathie Wood stock portfolio held nearly 9.2 million Block, Inc. (NYSE:SQ) shares in the third quarter of 2022, worth $505.45 million and representing 3.52% of the total 13F securities. Cathie Wood added 56,211 shares of Block, Inc. (NYSE:SQ) to her portfolio in Q3 2022.
Atlantic Equities analyst Kunaal Malde on October 13 reiterated an Overweight rating on Block, Inc. (NYSE:SQ) but slashed the price target on the shares to $75 from $110. The analyst said that due to the heightened likelihood that the U.S. and global economies will enter recession, he is now forecasting a modest economic downturn in 2023. Payments stocks are beginning to discount this scenario, but in the short-term “we prefer high quality stocks with attractive valuations and limited downside to consensus earnings forecasts,” such as Visa Inc. (NYSE:V), the analyst told investors in a research note.
According to the second quarter database of Insider Monkey, 72 hedge funds held stakes worth $3.5 billion in Block, Inc. (NYSE:SQ), compared to 84 funds in the prior quarter worth $6.18 billion. Brian Bares’ Bares Capital Management is a significant position holder in the company, with 6.63 million shares worth $408 million.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:
“Block, Inc. (NYSE:SQ) 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.”
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”
8. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 32
Teladoc Health, Inc. (NYSE:TDOC) is a New York-based provider of virtual healthcare services in the United States and internationally. At the end of September 2022, the Cathie Wood stock portfolio had 20.85 million shares of Teladoc Health, Inc. (NYSE:TDOC), worth $528.75 million and representing 3.68% of the 13F securities. ARK Invest strengthened its hold on Teladoc Health, Inc. (NYSE:TDOC) by 3% in Q3 2022.
On October 11, Barclays analyst Steve Valiquette lowered the price target on Teladoc Health, Inc. (NYSE:TDOC) to $33 from $40 and kept an Equal Weight rating on the shares. Given both macro and company-specific risks for healthcare information technology, the analyst sees more limited upside for Q3 earnings. His Q3 hospital survey indicated an ongoing positive outlook for revenue cycle spend in 2022 and 2023. However, the survey is “more muted for other HCIT trends,” the analyst told investors.
Among the hedge funds tracked by Insider Monkey, 32 funds reported owning stakes worth $1.20 billion in Teladoc Health, Inc. (NYSE:TDOC) at the end of Q2 2022, compared to 36 funds in the prior quarter worth nearly $2 billion.
Here is what Greenhaven Road Capital has to say about Teladoc Health, Inc. (NYSE:TDOC) in its Q1 2022 investor letter:
“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.”
7. CRISPR Therapeutics AG (NASDAQ:CRSP)
Number of Hedge Fund Holders: 25
CRISPR Therapeutics AG (NASDAQ:CRSP) is a gene editing company focused on developing gene-based medicines using its proprietary CRISPR-associated protein 9 (Cas9) platform. At the end of the September quarter, Cathie Wood owned 8.2 million CRISPR Therapeutics AG (NASDAQ:CRSP) shares worth $538.3 million, representing 3.75% of the total portfolio. CRISPR Therapeutics AG (NASDAQ:CRSP) has been part of the Cathie Wood stock portfolio since Q2 2017, with minor breaks over the years.
On October 11, Morgan Stanley analyst Terence Flynn initiated coverage of CRISPR Therapeutics AG (NASDAQ:CRSP) with an Underweight rating and a $37 price target. Though the analyst is confident in the ultimate FDA approval for CRISPR Therapeutics AG (NASDAQ:CRSP)’s primary drug exa-cel, he sees commercial hindrances so his estimates are behind consensus. He also sees limited short-term pipeline optionality.
According to Insider Monkey’s second quarter database, 25 hedge funds were long CRISPR Therapeutics AG (NASDAQ:CRSP), down from 37 funds in the earlier quarter. Steven Boyd’s Armistice Capital is a notable position holder in the company, with 1 million shares valued at nearly $61 million.
6. Intellia Therapeutics, Inc. (NASDAQ:NTLA)
Number of Hedge Fund Holders: 27
Intellia Therapeutics, Inc. (NASDAQ:NTLA) is a Massachusetts-based genome editing company that develops multiple therapeutics. Cathie Wood boosted her Intellia Therapeutics, Inc. (NASDAQ:NTLA) stake by 2% in Q3 2022, and held 9.65 million shares worth $540.4 million. The Cathie Wood stock portfolio has had a position in Intellia Therapeutics, Inc. (NASDAQ:NTLA) since the last quarter of 2016, apart from minor breaks over the years.
On October 11, Morgan Stanley analyst Terence Flynn initiated coverage of Intellia Therapeutics, Inc. (NASDAQ:NTLA) with an Overweight rating and an $84 price target. Categorizing it as “one of the leading genome editing companies,” the analyst observed that Intellia Therapeutics, Inc. (NASDAQ:NTLA) was the first company to demonstrate the ability to edit a gene in the body, or “in vivo,” as opposed to outside of the body, or “ex vivo.”
According to Insider Monkey’s data, 27 hedge funds were long Intellia Therapeutics, Inc. (NASDAQ:NTLA) at the end of June 2022, compared to 35 funds in the preceding quarter. Andreas Halvorsen’s Viking Global is a prominent stakeholder of the company, with 2.2 million shares worth $115.3 million.
Like Tesla, Inc. (NASDAQ:TSLA), Zoom Video Communications, Inc. (NASDAQ:ZM), and Roku, Inc. (NASDAQ:ROKU), Cathie Wood is bullish on Intellia Therapeutics, Inc. (NASDAQ:NTLA) as of Q3 2022.
Carillon Tower Advisers discussed its stance on Intellia Therapeutics, Inc. (NASDAQ:NTLA) in its Q2 2021 investor letter.
“Intellia Therapeutics is a clinical-stage genome editing company focused on the development of proprietary, potentially curative therapeutics. The company’s stock soared after announcing positive interim data from an ongoing phase 1 clinical study of its in vivo gene editing candidate, which is being developed as a single-dose treatment for hereditary transthyretin (ATTR) amyloidosis. This specific form of therapy would be the first of its kind resulting in the precision editing of a gene in a target tissue in the human body.”
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Disclosure: None. ARK Invest Stock Portfolio: Top 10 Picks is originally published on Insider Monkey.
