In this piece, we will take a look at the top ten picks in Ark Invest’s stock portfolio.
If there’s one thing that can be said for sure, it’s that Cathie Wood’s investment approach is one of the most unique on Wall Street. In a finance industry dominated by long, short, value, and growth plays, Wood focuses primarily on high growth stocks which she and her firm believe hold the keys to the future. This has seen Ark Investment, whose latest SEC filings had a cumulative value of $14.4 billion, see some of its investments grow in triple digit percentages while others have floundered.
In fact, we analyzed the long term performance of Cathie Wood’s top stocks as part of our coverage of 10 Best Stocks to Buy and Hold For 5 Years According to Cathie Wood. This piece analyzed Wood and her firm’s top 13F investments during Q4 2020 and checked their performance over the past three years. Out of these ten stocks, just one was in the green while nearly all others had lost most of their value or were down in red.
During this time, some of Wood’s predictions on the economy also stood at odds with the general consensus among Federal Reserve officials and other members of the finance industry. As a recap, the Fed started to aggressively raise interest rates in 2022 as part of its efforts to combat inflation. This caused a lot of pain for growth investors like Wood, as technology stocks started to fall. In June 2022, which saw the Fed announce a 75 basis point hike, which was the largest since 1994, Wood admitted that she was wrong about inflation. This acceptance came after her remarks in October 2021 on social media, in which she disputed Twitter (now X) founder Jack Dorsey’s assessment that the US economy was headed for hyperinflation. While Dorsey’s worries turned out to be a bit too extreme as well, Wood countered by stating:
“In 2008-09, when the Fed started quantitative easing, I thought that inflation would take off. I was wrong. Instead, velocity – the rate at which money turns over per year – declined, taking away its inflationary sting. Velocity still is falling.”
She added that three factors would force deflation. These were technologically “enabled innovation” driving down costs and making businesses postpone their spending, over leveraged firms selling subpar goods at below market prices, and businesses over ordering in response to the pandemic. These factors led her to conclude that “once the holiday season passes and companies face excess supplies, prices should unwind.”
Of course, as it turned out, prices in America shot to record high levels in October 2022 and devastated technology stocks in their wake. One of the worst hit sectors was the semiconductor industry, and had it not been for the popularity of artificial intelligence, then these stocks would have spent 2023 recovering from their record lows in the prior year.
Shifting gears to analyze Wood’s performance in 2024, her flagship fund is down 10.95% year to date. This stands in sharp comparison to the S&P benchmark’s and the tech heavy NASDAQ’s 15.20% year to date appreciation. In fact, the latter index is made of 100 of the most valuable technology stocks, so the fact that Wood’s flagship fund is down means that her focus on the extreme end of the innovation spectrum is still proving to be a bit too risky for a market that has dealt with the brunt of multi decade high interest rates over the past couple of years.
But what about stocks? Cathie Wood invests in a variety of stocks, ranging from video communications to gene editing and artificial intelligence. So perhaps some of her top stock picks of 2024 have done better during Q1 and Q2 as the market starts to comfortably price expectations for an interest rate cut in September. Well, the top five Cathie Wood stocks that you’ll find out about more as you read through this piece are mostly down. Their performance is -6.57%, 49%, -33.8%, -15.90%, and -5.63%, respectively, with the only stock in the green belonging to a financial trading platform provider that has benefited from the growing market adoption of Bitcoin. For some cryptocurrency stocks that are seeing love from analysts, you can check out 11 Crypto Stocks with Biggest Upside.
While simply analyzing the year to date performance of her top five stocks is an easy way to form an opinion about Cathie Wood’s latest investment strategy, we can also expand our focus to see which stocks she has positioned herself into as the Fed heads to an interest rate cuts. Insider Monkey’s research shows that during Q2 2024, Cathie Wood bought eight new stocks. Additionally, she has also invested in an ETF linked to 7-10 year US Treasury bonds and two exchange traded funds (ETFs) linked to Ethereum. So, which stocks is Cathie Wood buying as the Fed nears an interest rate cut?
Well, out of the eight new stocks that she bought in 2024’s second quarter, two belonged to the 3D printing industry (one of these ranked 4th in our coverage of the top 3D printing stocks), another is a healthcare play that claims to have “world’s largest library of clinical & molecular data,” followed by a cybersecurity stock, a digital promotions software provider, the 6th best SaaS stock to buy according to hedge funds, the 6th stock on this list which is another AI and software play, and the 3rd best undervalued stock to buy according to Reddit. Looking at their year to date performance, it is -33.42% and -77.7% for the 3D printing stocks, 8.99% for the healthcare play, and -6.49%, -35%, 2.47%, -7.49%, and -4.10%, respectively. As Wood would like to remind you, past performance is not an indicator of future returns, so whether she’s positioning herself for a recovery in most of these stocks on the back of a lighter monetary and economic environment is up for you to decide.
With these details in mind, let’s take a look at the top Cathie Wood and Ark Invest stock picks during the second quarter of 2024.
Cathie Wood of ARK Investment Management
Our Methodology
For our list of Ark Invest and Cathie Wood’s latest stock picks, we picked out the ten most valuable positions from Ark Invest’s Q2 2024 investment portfolio.
We also mentioned the number of hedge funds that had bought these stocks during the same filing period. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Investors in Q1 2024: 65
Ark Investment Management’s Q2 2024 Stake: $328 million
Shopify Inc. (NYSE:SHOP) is a Canadian eCommerce retailer that allows merchants to sell a wide variety of products on its platform. Unlike most other eCommerce companies, Shopify Inc. (NYSE:SHOP) separates itself from competitors by offering a one stop shop to merchants that allows them to optimize their businesses by running data analytics through tools such as Shopify Pro and Markets Magic. Additionally, Shopify Inc. (NYSE:SHOP) also offers a payment platform, which allows it to retain customers and leads to high switching costs. Since it is an eCommerce company though, and especially as software analytics packages tend to struggle in a high inflation environment, Shopify Inc. (NYSE:SHOP)’s shares are vulnerable to high inflation. However, Shopify Inc. (NYSE:SHOP) enjoys some advantages of scale, especially since it enables more than $250 billion of spending on its platform. Like other eCommerce firms, any weakness on the cost side and struggles with cash flow can spell trouble for the shares.
Shopify Inc. (NYSE:SHOP)’s management commented on another key aspect of its performance, i.e. international expansion, during its Q1 2024 earnings call:
“This quarter, we continued to make headway on our localization efforts in international markets with tools like shipping localized brochures in Japan, Spain and Italy, helping our merchants ensure a tailored experience and expand their reach. We’ve also been working to get more of our products into more countries. For example, in Q1, we successfully launched our point-of-sale go and point-of-sale terminal in Australia, further increasing the on-ramps into Shopify in this key market. Enabling merchants to sell cross-border to buyers anywhere in the world has been a key focus for us. In Q1, we saw a 70% increase in our markets product over last year, which makes it easy for merchants to sell in local currencies. We are further simplifying international expansion with Markets Pro, our native all-in-one cross-border merchant of record offering, which became generally accessible in the US in September of 2023.
Brands are leveraging Markets Pro to enter global markets within days and see immediate increases in their global sales. Take Chicago-based apparel company, SuitShop, which grew international orders by 600% since adopting Markets Pro or New York based skincare brand, Beekman 1802, which experienced 137% international sales growth in six months. And with cross-border GMV up 15% in Q1, representing roughly 14% of total GMV, we will continue to enable greater cross-border transactions for our merchants. As we mentioned on the last call, we continue to aggressively pursue enterprise brands in 2024, and we are seeing results. Whether it was key events like NRF and Shoptalk, our engagements with the larger brands are escalating every single quarter with our plus and enterprise GMV growth continuing to outpace overall GMV growth.”
9. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Investors in Q1 2024: 45
Ark Investment Management’s Q2 2024 Stake: $329.8 million
Palantir Technologies Inc. (NYSE:PLTR) is a data analytics software platform provider that primarily deals with government customers. Since it’s a software as a service (SaaS) stock, its customer base provides Palantir Technologies Inc. (NYSE:PLTR) the advantage of stability in a tough economy. This is because while enterprise spending typically slows down when interest rates are high, government spending is able to perform better. Like other software stocks, Palantir Technologies Inc. (NYSE:PLTR) has also focused on expanding its platform through offering AI. 2023 was a great year for the stock as the shares rallied by 167%. This came on the back of new initiatives like AI boot camps. Amidst uncertainty about the use of cases of AI, through boot camp Palantir Technologies Inc. (NYSE:PLTR) allowed customers to try out AI and build their use case models relatively quickly. As of mid July, Palantir Technologies Inc. (NYSE:PLTR) had completed more than 1,800 boot camps, indicating strong demand for its AI initiatives amidst a slowdown in federal spending.
Palantir Technologies Inc. (NYSE:PLTR) commented on its cost control initiatives and consumer growth during its Q1 2024 earnings call:
“We delivered our sixth consecutive quarter of GAAP profitability, generating a record $106 million of GAAP net income in the first quarter. We also delivered our fifth consecutive quarter of GAAP operating profit, generating a record $81 million of GAAP operating income in the quarter. Adjusted operating margin expanded to 36% in the first quarter, continuing to highlight the strong unit economics of our business. The revenue and profitability outperformance drove a 3-point sequential increase to our Rule of 40 score from 54 in the fourth quarter of 2023 to 57 in the first quarter of 2024.
This was the third consecutive quarter of an expanding Rule of 40 score. . .Excluding the impact from strategic commercial contracts, first quarter commercial revenue grew 36% year-over-year and 4% sequentially. We had a very strong quarter of commercial bookings. First quarter commercial TCV booked was $505 million, representing 187% growth year-over-year. Our US commercial business continues to see unprecedented demand driven by momentum from AIP. First quarter US commercial revenue grew 40% year-over-year and 14% sequentially to $150 million, surpassing international commercial revenue for the first time. Excluding revenue from strategic commercial contracts, first quarter US commercial revenue grew 68% year-over-year and 22% sequentially. AIP is driving both new customer conversions and existing customer expansions in US.”
8. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Investors in Q1 2024: 33
Ark Investment Management’s Q2 2024 Stake: $377 million
UiPath Inc. (NYSE:PATH) is a software company that enables businesses to automate their processes. Another enterprise software company, its hypothesis is primarily dependent on revenue growth, robust margins, and customer growth. These three factors made it unsurprising that UiPath Inc. (NYSE:PATH)’s shares tumbled by a whopping 34% in May 2024. This share price drop came after the firm’s first quarter earnings report which revealed that UiPath Inc. (NYSE:PATH)’s Q1 2024 revenue of $355 million beat estimates by a hairline of 0.6%. At the same time, the firm also cut its FY2025 guidance by 10% to $1.4075 billion and announced a 10% labor force cut. Naturally, investors were spooked since slowing revenue and lower employees meant that UiPath Inc. (NYSE:PATH) might be unable to position itself for growth in the AI era. These woes were further compounded by the fact that the firm’s deal duration appeared to be shortening, which doesn’t bode well for the fourth key tenet of software stock valuation, i.e., recurring revenue.
UiPath Inc. (NYSE:PATH)’s management commented on the shortening deals during its Q1 2024 earnings call. Here’s what it said:
“Yes. I think that around six, seven weeks ago, we were starting to see some pressure, especially on the large multiyear deals. Some of them got shrank. Some of them got postponed. We are not seeing the cause as being from a competitive standpoint. But it’s — I think it’s a combination of factors, macro-economical environment is variable and customers are a bit more cautious, and they do more scrutiny into the deals. Another factor for us was a change in the sales comp that happened at the beginning of this fiscal year. And we incentivized a little bit less the multiyear deals, which in retrospect, it was an execution issue. And also, I would say, for us, some late-stage deal execution challenges were identified.
We had some — to give you some examples, some kind of, in one deal, it was procurement error that happened late into the quarter. Another deal, it was a budget reprioritization that we got, were a little bit too late in the quarter.”
7. CRISPR Therapeutics AG (NASDAQ:CRSP)
Number of Hedge Fund Investors in Q1 2024: 27
Ark Investment Management’s Q2 2024 Stake: $420 million
CRISPR Therapeutics AG (NASDAQ:CRSP) is a gene editing company that is known for its CRISPR Cas9 gene editing platform. A biotechnology stock, CRISPR Therapeutics AG (NASDAQ:CRSP)’s shares depend on its ability to sign deals with large pharma companies to commercialize its products and develop and test products that are suitable for commercialization. This was also the case in November 2023 when CRISPR Therapeutics AG (NASDAQ:CRSP)’s shares jumped by 14% in a day after the UK became the first country to approve a sickle cell therapy developed through its platform. At the same time, securing approval is only one part of the valuation, and as evidenced in 2024, CRISPR Therapeutics AG (NASDAQ:CRSP)’s shares have struggled. This is because the market does not expect major revenue contributions from the sickle cell treatment called Casgevy, based on statements made by the medicine’s primary developer, Vertex Pharmaceuticals. Vertex paid CRISPR Therapeutics AG (NASDAQ:CRSP) $170 million in 2023 as milestone payments, and CRISPR is eligible for another $130 million which leaves some room for future growth.
6. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Investors in Q1 2024: 26
Ark Investment Management’s Q2 2024 Stake: $434 million
Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services provider that enables retail users to trade equities and other securities. As of May 2024, the firm had 24 million funded customers, which leaves it with a lot of room to grow the user base. Robinhood Markets, Inc. (NASDAQ:HOOD) also has the early advantage in the retail investing market, which only truly started to stretch its muscles during the coronavirus pandemic and through the meme stock mania. However, Robinhood Markets, Inc. (NASDAQ:HOOD)’s main market is primarily cyclical in nature, which means that low inflation and economic growth are key for its fate. This was also evident during the first quarter, since as soon as retail investors’ sentiment for the economy started to improve, its net revenue grew by 40% to sit at $618 million and lending it an average revenue per user (ARPU) of $103. This growth was also fueled by the rising acceptability of cryptocurrency, which is another favorite retail investor security.
Robinhood Markets, Inc. (NASDAQ:HOOD)’s management is also trying to grow high fee membership options to drive recurring revenue. Here’s what it had to say about these during the Q1 2024 earnings call:
“We’re also delivering growth in Robinhood Gold. As a reminder of how Gold subscribers on average compare to our customers overall, in Q1, Gold subscribers had 8 times the [assets] (ph) with an average of over $40,000, grew net deposits roughly twice as fast, and had 5 times the retirement account adoption. Gold ARPU is also multiples of our average customer, which includes annualized recurring subscription revenue approaching $100 million. And in Q1, we grew Gold subscribers to 1.7 million, up 42%, or 500,000 from last year. This momentum has continued into Q2 as we added another 140,000 Gold subscribers in April, more than half of our Q1 growth. Let’s now turn to our financial results. In the first quarter, we generated net income of $157 million, up 5x sequentially as we grew revenues and stayed disciplined on expenses.”
5. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Investors in Q1 2024: 50
Ark Investment Management’s Q2 2024 Stake: $496 million
Roblox Corporation (NYSE:RBLX) is a technology company that provides an online platform that allows users to immerse themselves in a digital world. Like Facebook, this means that its story depends on revenue and profitability per user, and since Roblox Corporation (NYSE:RBLX) is a young company that aims to popularize a new platform, growth is another key metric for its performance. Additionally, the software nature of its products means that Roblox Corporation (NYSE:RBLX) has to tightly control costs or incur Wall Street’s wrath. After crashing in May, Roblox Corporation (NYSE:RBLX)’s shares have gained roughly 10% in July as sentiment surrounding its DAUs continues to improve. June saw Sensor Tower share that Roblox’s DAU grew by 28% annually in April. Additionally, the firm is also diversifying its revenue base away from in game purchases to also include areas such as video advertising.
On the advertising front, here’s what management shared during the Q1 2024 earnings call:
“We want to — this is the year we are focusing on advertising, portal and video. We are excited about in world physical shopping, partially because it is a way for our partners to attribute and measure the success of their ads in addition to buy stuff. So in World Shopping is very early. We are not incorporating that revenue in any of our models for really ’24 or ’25. But it does point to a future where just as being with friends together on Roblox when you’re playing or you’re playing hide & seek or you are socializing or whatever that — it’s an exciting what we believe new way over time, that more people will shop together. And we do see a future over time without any forecast or expected dates, we are going with friends to shop together in 3D trying things on buying physical items is going to be part of what people think of Roblox.”
4. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Investors in Q1 2024: 65
Ark Investment Management’s Q2 2024 Stake: $534 million
Block, Inc. (NYSE:SQ) is a software and hardware company that provides financial payments management software along with payment processing hardware. Since its performance depends on transaction volume, Block, Inc. (NYSE:SQ)’s shares are also dependent on the state of the economy and consumer and business spending. Consequently, the shares gained 23% in 2023 as the economic outlook continued to improve, Block, Inc. (NYSE:SQ) reported robust spending volumes, and investor worries about a recession continued to dissipate. Additionally, the software heavy nature of its business means that the firm also depends on cost control which hinges on becoming a Rule of 40 firm. On this front, Block, Inc. (NYSE:SQ) hopes to achieve this status by the end of FY2026. In short, economic conditions, transaction volume, product innovation, and cost control are the four pillars of Block, Inc. (NYSE:SQ)’s hypothesis.
Block, Inc. (NYSE:SQ)’s management also shared key details for its volume expectations for the remainder of 2024 during the Q1 2024 earnings call:
“In the back half of the year, we expect GPV growth to be stable to improving behind more favorable same-store growth comparisons with a narrowing delta between gross profit and GPV growth rates. We continue to focus on initiatives that improve our product velocity. These include several upcoming launches that further our strategies for Cash App and Square, most notably testing and rolling out Afterpay on Cash App Card. And for Square, completing the orders migration this summer and conversion to a single app by year-end. These initiatives remain on track, and we expect them to benefit our growth into 2025 and beyond. For profitability in 2024, we are now expecting at least $1.3 billion in adjusted operating income or 15% margins on gross profit.”
3. Roku, Inc. (NYSE:ROKU)
Number of Hedge Fund Investors in Q1 2024: 39
Ark Investment Management’s Q2 2024 Stake: $762 million
Roku, Inc. (NYSE:ROKU) is a hardware and software firm that provides a platform to enable users to stream television content and hardware that allows them to view the content. Even though its shares are down by nearly 83% since 2020, Roku, Inc. (NYSE:ROKU) has managed to grow its market penetration in the streaming market. Between 2020 and 2023, Roku, Inc. (NYSE:ROKU)’s revenue has grown by 89% on an absolute basis. However, this growth isn’t enough to satiate Wall Street, as investors are worried about a general slowdown in US advertising performance and a plethora of streaming services. These fears aren’t helped by news such as Apple’s Apple TV+ being unprofitable. Roku, Inc. (NYSE:ROKU) is currently seeking to expand in international markets to keep up its pace of subscriber growth. This should take some time to materialize, which then makes a EV to sales ratio of 1.95 unsurprising.
Roku, Inc. (NYSE:ROKU)’s management commented on its international expansion plans during the Q1 2024 earnings call when it shared:
“However, the year-over-year growth rate of streaming services distribution in Q1 2024 was lower than the year-over-year growth rate in Q4 2023 due to lapping past price increases and higher mix-shift towards entry-priced ad-supported offerings. Devices revenue increased 19% year-over-year in Q1, driven by the expansion of retail distribution of Roku branded TVs. ARPU was $40.65 in Q1 on a trailing 12-month basis, flat year-over-year. This reflects an increasing share of streaming households in international markets where we are currently focused on growing scale and engagement. Q1 total gross margin was 44%, down slightly year-over-year. Platform gross margin of 52% was stable year-over-year, while devices gross margin was negative 5%, which was down 8 points year-over-year.”
2. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Investors in Q1 2024: 48
Ark Investment Management’s Q2 2024 Stake: $790 million
Coinbase Global, Inc. (NASDAQ:COIN), the popular cryptocurrency exchange, is up by 44% year to date which is unsurprising. The year has seen several Bitcoin ETFs become available to investors for trading, which then led to volume growth on Coinbase Global, Inc. (NASDAQ:COIN)’s exchanges. The stock’s valuation is dependent on the volume on its platform, and its ability to maintain consumer trust and keep ahead of any potential new entrants to the market. Data from CoinGecko shows that Coinbase Global, Inc. (NASDAQ:COIN) commanded 76.2% of the US volume in March 2023, and the stock surged by a whopping 393% in 2023 as its main rival Binance ran afoul of the US government and faced stifling restrictions. Simply put, Coinbase Global, Inc. (NASDAQ:COIN)’s future is dependent on crypto performance, and the stock should respond favorably in case of more tailwinds.
Patient Capital Management mentioned Coinbase Global, Inc. (NASDAQ:COIN) in its Q2 2024 investor letter. Here is what the firm said:
“Coinbase Global (COIN) was a top detractor following cryptocurrencies lower throughout the quarter. While cryptocurrencies are going through a digestion period following the all-time high reached by Bitcoin in March, we believe it is still the early innings for institutional adoption and exposure to cryptocurrencies. We believe Coinbase continues to solidify its position as the platform of choice for the crypto-ecosystem and will benefit from this increasing demand over time.”
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Investors in Q1 2024: 74
Ark Investment Management’s Q2 2024 Stake: $1 billion
Tesla, Inc. (NASDAQ:TSLA) is one of the most diversified car companies in the world. While its primary line of business is making and selling electric cars, it has also positioned itself well to benefit from any growth in renewable energy storage and artificial intelligence. Tesla, Inc. (NASDAQ:TSLA) is one of the earliest movers in the AI industry courtesy of its assisted driving software FSD’s reliance on machine learning to help users with their driving needs. Tesla, Inc. (NASDAQ:TSLA)’s latest quarter saw it reap the benefits of this diversification, as while its automotive revenue dropped by 7% annually to sit at $21.2 billion, energy storage doubled and grew by 100% to sit at $1.5 billion. However, this still makes Tesla, Inc. (NASDAQ:TSLA) an EV stock, and this brings with it the complexities of having to deal with the dependence on consumer purchasing power, the lithium supply chain, and tough competition in markets such as China.
Additionally, Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk made some telling comments during the Q2 2024 earnings call where he shared that he had no choice but to compete with NVIDIA due to the tight GPU supply chain:
“Yes, so Dojo, I should preface this by saying I’m incredibly impressed by NVIDIA’s execution and the capability of their hardware. And what we are seeing is that the demand for NVIDIA hardware is so high that it’s often difficult to get the GPUs. And there just seems this, I guess I’m quite concerned about actually being able to get state-of-the-art NVIDIA GPUs when we want them. And I think this therefore requires that we put a lot more effort on Dojo in order to have — in order to ensure that we’ve got the training capability that we need. So we are going to double down on Dojo, and we do see a path to being competitive with NVIDIA with Dojo. And I think we kind of have no choice because the demand for NVIDIA is so high and the — it’s obviously their obligation essentially to raise the price of GPUs to whatever the market will bear, which is very high. So, I think we’ve really got to make Dojo work and we will.”
TSLA remains Cathie Wood’s favorite stock as of Q2 2024. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None.
