Cathie Wood’s Strong Comeback: ARK’s Latest Stock Picks, Portfolio Updates and Comments

Published on April 1, 2021 at 12:42 pm by Fahad Saleem in Hedge Funds, News

In this article, we will analyze a video of Cathie Wood and see her important comments about various sectors, stocks and her expectations from the market. We will also take a look at some of the top stock picks of ARK Investment. You can skip our detailed discussion and go directly to Cathie Wood’s Top 5 Stock Picks.

Cathie Wood’s ARK Investment had a rough March as growth stocks receded following a sharp rise in government bond yields. Since early February to March 8, Cathie Wood’s five ETFs plummeted over 23%. Year to date, ARK’s Innovation ETF is down 3.6% through March 31. Recently, Morningstar’s Robby Greengold called ARK’s management “inexperienced” and “ill-prepared” to handle any major plot twist in financial markets.

However, what happened in March was a much-needed test for patience for Cathie Wood’s massive fan base, which often calls the 65-year-old investor as “Mama Cathie” or “Queen of Investing.” Cathie Wood mostly bets on companies whose products would bear fruit well into the future. Cathie Wood’s portfolio in 2021 comprises growth stocks from futuristic sectors like DNA sequencing, EVs, orbital space, tele-health and payments. These are mostly long-term bets. Anyone hoping to pile into these stocks for speculative returns is failing to understand Cathie Wood’s investment philosophy.

‘Mama Cathie’ Makes a Comeback

As investors started losing money and patience, Ms. Wood called for patience. And it seems she has got a loyal investor base. Bloomberg reported April 1 that within this week, Ark Innovation ETF added a whopping $717 million in investments, while Ark Space Exploration and Innovation fund received $281 million on its debut.

Cathie Wood isn’t alone. The entire hedge fund industry is going through difficult times. The industry that once used to post sterling gains is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

In this article we will analyze a YouTube talk of Cathie Wood from February, highlighting her stock picks, investment thesis for various sectors and her outlook for the U.S. economy. After mentioning her important comments, we will take a look at ARK’s top stock picks from the sectors liked by Ms. Wood.

Cathie Wood of ARK Investment Management

‘We Are Not in a Bubble’

“I’m glad to see the market is discerning. It’s a sign we’re not in a bubble. We’re seeing commodity prices are really starting to gain attraction. That could give the dollar a bit of a reprieve from the downturn that has been in place for about a year. We’ll see what the markets focus on more, either the fiscal deficit or the trade deficit. That will be an interesting dichotomy. Workweek went up 0.3 hours which is a huge increase, and it will be associated with a lot of economic activity. Those two numbers were I would say on balance, better than expected and I put a lot of weight on that average workweek.”

Cathie Wood about Auto Stocks

“The auto market is going to scale globally at an 82% compound annual rate during the next five years. Think about that. There’s a huge amount of progress being made because the costs are dropping at such a rapid rate and we can make this progress now. We think there’s a creative explosion, and it’s not just in gaming. It’s probably in every sector. We believe these digital wallets are going to be much more valuable than we once thought.”

Cathie Wood about Payment and Digital Wallets

“Digital wallets could become the most valuable technology developments per user of almost anything. We’re pretty excited about that. If you were to draw a graph as we did in our big ideas showing how JPMorgan Chase & Co. (NYSE: JPM) got to these levels, it was one acquisition after the other, whereas Cash App and Venmo, because they are viral in nature, have gotten there organically.”

Cathie Wood is Not Afraid of Robots

“We are right now at roughly 20 robots per 10,000 employees, and we believe it will only take 5 years to get to 200. A lot of people are afraid when they hear that. They’re thinking about their own jobs, but the history of technology is, yes there will be displacements but it will create many more jobs than it will destroy. So we are not afraid of this.”

Changing Trends in Jobs and Education

“We were also commenting on working fewer hours. Well, influencers on Instagram, that’s a job, I don’t think they’re working 8 hours a day, maybe some of them need to do it, and they’re making a very fine living. We’re also talking about education as well. The nature of education is changing. Elon Musk this week, said that his school-age children are learning mostly through YouTube. They’ll tune in to us for innovation and then they go off to YouTube to do a little more exploration.”

Drones, Food Delivery and Transportation

“You can imagine all the food preparation, the shopping, the cooking, the cleaning up, and now we have food delivery. And we think, with drone technology, in 5 years, we’re going to have an astonishing amount of our food intake, and this will be because of food delivery. We think ride-hailing today is about a $150 billion market. We think it’s going to be $6-$7 trillion by 2030.

If you think there’s going to be a collapse in transportation costs because of course drones are autonomous as well, the difference in cost between remotely piloted drones and completely autonomous drones to send a package 10 miles would be $7.80 per mile for the remotely piloted drone versus the $0.25 per mile of the autonomous drones.– We believe that by 2030, 19% of all food deliveries will be done by drones, and that will be a $116 billion market.”

Cathie Wood on Space Stocks

“If there’s one space that we’ve seen all of our technologies converging, it is in orbital space. They think about all the satellites that SpaceX is sending out there to help with global connectivity. That’s a $40 billion total available market, $10 billion of which believe it or not, is in the US, in our rural areas, and $30 billion in the rest of the world. The bigger market we believe is hypersonic flight, going from New York to Tokyo in 2 hours instead of 13 hours.– Our estimates are conservative, that’s a $270 billion market. It is emerging from the valley of despair, and combined with artificial intelligence, we think this is a $120 billion market in 5 years.”

DNA Sequencing and Healthcare

“It is much more accurate and reliable than short-read sequencing, and we’re excited about the multi-screening cancer opportunity that we think, by 2025 will reach a low enough cost with long-read sequencing, so that it will pay reimbursement for those 40(years) and over, so we can all start screening earlier for this disease associated with older age, and either prevent or cure, with gene editing, cancer in stage 1. The way we’ve described it historically, we are able to train our immune system to recognize and fight cancer, and that’s with our own T cells.”

Let’s now take a look at some of the top stock picks of Cathie Wood from the sectors she is bullish on.

11. Aerojet Rocketdyne Holdings, Inc. (NYSE: AJRD)

California-based Aerojet makes aerospace and defense products and systems. The stock is up 13.88% over the last 12 months. In December 2020, Lockheed Martin announced plans to acquire Aerojet for roughly $4.4 billion. In February, Raytheon Technologies announced that it would formally oppose the deal amid concerns about competition. Aerojet is a major supplier of parts to Raytheon.

ARK Investment Management currently holds 24,044 shares of AJRD that amounts $1.3 million.

10. Virgin Galactic Holdings, Inc. (NYSE: SPCE)

Richard Branson’s spaceflight company Virgin Galactic is one of the top picks of Cathie Wood as of the fourth quarter of 2020. The company has ambitious plans to start sending customers for space tourism next year. In March, Truist Financial started covering SPCE with a Buy rating. The firm said it believes the company is strongly positioned to benefit from the emerging commercial space tourism industry. The firm set a price target of $50 for SPCE.

Cathie Wood’s ARK Investment Management currently owns 1.3 million shares of SPCE, worth $31.9 million. SPCE occupies 0.08% of ARK’s overall equity.

9. BYD Company Limited (OTCMKTS: BYDDF)

BYD is one of the best EV plays right now. Legendary investor Warren Buffett has a major stake in the company. The company recently announced that its profit more than doubled in 2020 amid rising demand. The company saw a 162% increase in its net income in 2020.

ARK Investment Management currently holds 864,427 shares of BYD Company, worth $45.6 million. BYDDF occupies 0.12% of ARK’s total portfolio.

8. Iridium Communications Inc. (NASDAQ: IRDM)

PayPal is a notable name in Cathie Wood’s ARK portfolio. Last month, PayPal launched Checkout with Crypto, allowing users to check out by using cryptocurrency during transactions. The feature gained a lot of attention because it allows users to convert cryptocurrency holdings to fiat currency at checkout. PayPal stock has gained over 160% over the last 12 months. The company has roughly 377 million users globally.

As of the end of the fourth quarter of 2020, ARK Investment Management owns 6.97 million shares of IRDM worth $274.1 million. IRDM accounts for 0.72% of ARK’s total portfolio.

7. Baidu, Inc. (NASDAQ:BIDU)

Baidu is one of the top picks of Cathie Wood. The Chinese internet giant is getting a lot of attention as it plans to launch EVs in partnership with Geely over the next 3 years. Loop Capital recently upped its rating for the stock to Buy citing Baidu’s foray into EVs. The firm likes the company’s Apollo AV program. Loop also increased its price target for the company to $290 from $210.

ARK Investment Management currently owns 2.26 million shares of BIDU, worth $488.9 million. Baidu occupies 1.3% of ARK’s overall equity.

6. PayPal Holdings, Inc. (NASDAQ: PYPL)

Cathie Wood’s ARK Investment Management currently holds 2.6 million shares of PYPL, worth $605.3 million. PYPL occupies 1.61% of ARK’s total portfolio.

To continue reading about the top stock picks of Cathie Wood, click Cathie Wood’s Top 5 Stock Picks and Portfolio Updates