We recently compiled a list of the ARK Invest Stock Portfolio: Top 10 Stock Picks for 2024. In this article, we are going to take a look at where Block, Inc. (NYSE:SQ) stands against ARK Invest’s top stock picks for 2024.
ARK Investment Management LLC, more commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida, that oversees several actively managed ETFs. It was registered in 2014 by Catherine Wood, who is known for making big bets on disruptive technology like self-driving carse and genomics. The investment fund has around $6.7 billion in assets under management.
READ ALSO: Cathie Wood’s 11 Favorite AI Stocks and Jim Cramer November Portfolio: Top 10 Stocks.
Wood’s flagship fund has faced pressures for the third straight year, with outflows at nearly $1.8 billion during the first six months of 2024, which was close to triple the outflows seen in 2023. Its closing price of $57.85 on November 11 was down 60% from the highs of early 2021. In a letter posted to investors in July, she acknowledged that the fund’s performance was challenged by certain stock picks and the overall macroeconomic environment, but added that ‘our conviction in and commitment to investing in disruptive innovation have not wavered’.
The ARK Invest CEO argued that the fund’s holdings were set to benefit once the Fed rate cuts begin and that she anticipates another period of strong returns, reminiscent of the gains witnessed during the initial days of the pandemic. In August this year, in the hope of buying the dip, Wood piled into several tech stocks whose shares had tumbled in the months prior. Since the announcement of interest rate cuts in September, ARK’s flagship ETF has grown 25%, with a major upward spike in the week running up to and following the presidential elections, which Donald Trump won on November 5.
In a post-election message released to investors, Wood likened the country’s current economic situation to the Reagan era in the early 1980s, when the interest rate and tax cuts resulted in robust economic growth, eventually helping the United States grow out of deficit and into a surplus in the Clinton era.
Cathie Wood predicts a bright future and has stated that Trump’s policies will ‘turbocharge’ the American economy more powerfully than the Reagan Revolution did. She expects the newly elected president to slash regulations and cut tax rates, as he did during his first term.
Trump during his election campaign vowed to reduce the corporate tax rate to 15%, after having already cut the rate from 35% to 21% in his presidency between 2017 and 2021. Having said that, Wood believes that businesses will put investments on hold until the promised cuts are delivered, which means the positive anticipated impact on the economy will be delayed.
Methodology
We scanned the ARK Investment Management portfolio, as of September 30, 2024, and picked the top 10 stocks according to their stake value. The figures were sourced from the Insider Monkey Database.
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).
People using the Cash App paying for goods and services, highlighting the impact the of the company’s payment tools.
Block, Inc. (NYSE:SQ)
Stake Value as of Q3 2024: $444,767,776
Block, Inc. (NYSE:SQ) is an American company that offers financial services to clients through its two segments: Square and Cash App.
The Square segment includes managed payment services, hardware, software solutions, and other financial services that help sellers start and run their businesses. The Cash App segment offers consumers financial tools via the mobile app, allowing them to make payments, invest in stocks and bitcoin, and more. The company was formerly known as Square, Inc., until 2021, when it decided to change the name to Block, Inc. (NYSE:SQ), reflecting its growing focus on crypto and blockchain technologies.
On November 7, the company held its third-quarter earnings call, announcing results that trailed Wall Street’s revenue expectations. Revenue for Q3 was posted at $5.98 billion, falling short of the expected $6.24 billion, signaling softening consumer demand. However, Block, Inc. (NYSE:SQ) narrowly beat profit expectations, logging an EPS of $0.88. This was one cent higher than estimates and was powered by company-wide expense discipline.
Shares have fallen 4% since these results, but analysts remain bullish on the stock and have a consensus BUY rating, with a median share price upside potential of 10.3%. They believe that a soft landing for the economy with Fed cuts is likely to boost consumer spending in the months ahead.
ARK Invest has the largest stake in the company, valued at over $444 million, as of September 30, 2024. The investment represents 4.06% of ARK’s portfolio, making Block, Inc. (NYSE:SQ) one of the top picks from the ARK Invest stock portfolio.
Overall SQ ranks 5th among the ARK Invest’s top Stock Picks for 2024. While we acknowledge the potential of SQ as an investment, our conviction lies in the belief that 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 SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.