In this article, we discuss the 5 stocks that Cathie Wood is doubling down on despite losses. If you want to read our detailed analysis of these stocks, go directly to Cathie Wood is Doubling Down on These 10 Stocks Despite Losses.
5. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 28
Loss in Share Price Over Past Year: 62%
Percentage Increase in Stake During Q4: 29%
DraftKings Inc. (NASDAQ:DKNG) is a digital entertainment and gaming firm. Elite hedge funds have been piling into the stock in recent months. At the end of the third quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in DraftKings Inc. (NASDAQ:DKNG), up from 26 the preceding quarter worth $927 million.
The hedge fund chaired by Wood owned close to 17 million shares of DraftKings Inc. (NASDAQ:DKNG) at the end of December 2021 worth $844 million, representing 2.02% of the portfolio.
In its Q2 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and DraftKings Inc. (NASDAQ:DKNG) was one of them. Here is what the fund said:
“DraftKings is an online gaming operator. Its legacy Daily Fantasy Sports (DFS) allows users to virtually draft teams of players from professional sports leagues and potentially earn a payout based on how athletes perform. DraftKings Online Sports Betting (OSB) involves the company taking wagers or bets from customers on sporting events. The company’s third offering, Online Casino (iGaming), involves customers betting real money when playing casino games like slots and blackjack online.
DFS is legal in most states, while approximately 25% of the country’s population has access to OSB and approximately 10% has access to iGaming. Within a year, we expect approximately 40% or more of the population to have access to OSB as legalization moves rapidly.
The company reported a strong quarter, with revenues exceeding expectations by more than 30%. We think the stock underperformed due to the time period between the conclusion of March Madness and the start of the NFL season being a weaker betting period and concerns about more intense competition. Concerns around tough comps have also hindered performance of DraftKings shares. We note that monthly state data continues to be robust, showing no signs of slowing from reopening. We also believe DraftKings is increasing its potential to gain market share by moving its tech-platform to SBTech, which is a sports betting platform the company acquired as part of a SPAC deal. Legalization of sports betting by states has also been robust.”
4. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 50
Loss in Share Price Over Past Year: 21%
Percentage Increase in Stake During Q4: 34%
Roblox Corporation (NYSE:RBLX) owns and runs an online entertainment platform. Regulatory filings reveal that ARK owned over 1.2 million shares of Roblox Corporation (NYSE:RBLX) at the end of December 2021 worth $97 million, representing 0.23% of the total portfolio.
Roblox Corporation (NYSE:RBLX) is a top metaverse play on Wall Street. At the end of the third quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Roblox Corporation (NYSE:RBLX), up from 49 in the previous quarter worth $4.9 billion.
In its Q2 2021 investor letter, Guardian Fund, an asset management firm, highlighted a few stocks and Roblox Corporation (NYSE:RBLX) was one of them. Here is what the fund said:
“The wonder-tale stories of children’s books show us that there are infinite possibilities of stories and worlds. The metaverse, the idea that describes the shared 3D spaces in a virtual universe, is enabling people to create fiction. Over the past six months, we initiated a new investment in Roblox. The firm was founded in 1989 by David Baszucki and Erik Kassel when they programmed a physics lab where students could study how cars would crash.
Today, Roblox has become a leading platform with a mission to build a human co-experience that enables billions of users to play, learn, and build friendships in the metaverse. Recent advances in cloud computing, computing devices, and machine learning, enable the materialization of the metaverse. Take what we have in virtual reality today and fast-forward a few decades. Humans will be able to experience unimaginable things and in a couple of millennia virtual economies are likely to become bigger than the physical trade on planet Earth.
Over the first quarter of 2021, Roblox reported 140% revenue growth, 42.1 million daily active users, and 9.7 billion engaged hours. The opportunity for this platform is massive.”
3. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 27
Loss in Share Price Over Past Year: 47%
Percentage Increase in Stake During Q4: 102%
UiPath Inc. (NYSE:PATH) provides robotic process automation. Hedge funds have been selling the stock in recent months. At the end of the third quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $3.6 billion in UiPath Inc. (NYSE:PATH), down from 46 the preceding quarter worth $3.4 billion.
Securities filings show that ARK owned over 23.9 million shares in UiPath Inc. (NYSE:PATH) at the end of the fourth quarter of 2021 worth $1.2 billion, representing 3.02% of the portfolio.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and UiPath Inc. (NYSE:PATH) was one of them. Here is what the fund said:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
2. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 37
Loss in Share Price Over Past Year: 87%
Percentage Increase in Stake During Q4: 211%
StoneCo Ltd. (NASDAQ: STNE) provides financial technology solutions. Latest data shows thark ARK owned close to 1.8 million shares of StoneCo Ltd. (NASDAQ: STNE) at the end of December 2021 worth $63 million, representing 0.15% of the total portfolio.
Hedge funds have been offloading StoneCo Ltd. (NASDAQ: STNE) as inflation climbs. 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.
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.”
1. Zymergen Inc. (NASDAQ:ZY)
Number of Hedge Fund Holders: 9
Loss in Share Price Over Past Year: 89%
Percentage Increase in Stake During Q4: 245%
Zymergen Inc. (NASDAQ:ZY) is a commodity chemicals firm. At the end of the third quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $96 million in Zymergen Inc. (NASDAQ:ZY), compared to 15 the preceding quarter worth $241 million.
ARK owned 3.7 million shares of Zymergen Inc. (NASDAQ:ZY) at the end of the fourth quarter of 2021 worth $49 million, representing 0.11% of the portfolio.
In its Q3 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Zymergen Inc. (NASDAQ:ZY) was one of them. Here is what the fund said:
“Zymergen Inc. is a company dedicated to biofacturing, or harnessing bacteria to manufacture materials. Zymergen was a detractor following an unexpected update announcing both a major delay in the launch of lead product Hyaline and the removal of CEO Josh Hoffman, who was replaced by company chairman and former Illumina CEO Jay Flatley. We exited our position given material impacts to the business.”
You can also take a peek at 10 Best Healthcare Dividend Stocks to Buy Now and 10 Dividend Stocks with Over 20 Years of Dividend Increases.
