In this article, we discuss Cathie Wood’s thoughts on the automobile industry and her top 10 car stock picks. If you want to skip our detailed analysis of Wood’s history, investment philosophy, and hedge fund performance, go directly to Cathie Wood’s Thoughts on Automobile Industry and Her Top 5 Car Stock Picks.
Cathie Wood oversees the $42 billion portfolio of ARK Investment Management. Wood formed ARK Investment Management in 2014, focusing on purchasing assets in innovative sectors such as genomics, self-driving cars, artificial intelligence, and blockchain technology. Cathie Wood began her career as an assistant economist at Capital Research in 1977. The star fund manager has worked in the financial industry for nearly four decades. Wood joined Alliance Bernstein in 2001 as chief investment officer, managing $5 billion in assets.
Cathie Wood’s exchange-traded funds and stock picks gained popularity among investors in 2020 when her flagship ARK Innovation ETF (NYSE:ARKK) returned more than 150%. However, ARK’s flagship fund dropped 21% last year. As of Q3 2021, Tesla, Inc. (NASDAQ:TSLA) is Wood’s biggest holding representing 7.36% of ARK Investment Management’s holdings followed by Teladoc Health, Inc. (NYSE:TDOC) and Coinbase Global, Inc. (NASDAQ:COIN).
Cathie Wood’s Thoughts on Automobile Industry
In a January webcast for investors, ARK Investment Management CEO Cathie Wood discussed the auto industry and shared data indicating that the bubble in used cars might burst soon. One of the data points shared by the hedge fund manager during the webcast was the price drop in used cars after a year-over-year peak increase of 60% last year. Wood stated that the price of used cars began to fall 1.2% month to month, with an annualized price drop of approximately 12%. Cathie Wood believes that the price of used cars will continue to fall due to an inventory buildup. According to Wood, year-over-year used car sales are down 4%.
In the new car space, new auto sales in the US decreased in the previous months from their peak in April 2021 at 18.25 million units. Although the semiconductor chip shortage was starting to alleviate in October, Wood shared data of decreased new auto sales of approximately 13 million at the time. In November, only 12.86 million new cars were sold, and in December, new car sales fell further to 12.44 million units. Meanwhile, electric vehicles were up nearly 100% at an annual rate.
Wood explained that the drop in new vehicle sales could be attributed to the combination of a decrease in consumer sentiment and a shift in consumer preference toward electric vehicles. In relation to this, the top stock picker tweeted that China is a leading indicator of a shift in consumer preference for EVs. According to ARK Invest data, gas-powered car sales in 2021 in China were down about 4%, while battery electric vehicle sales were up about 145% compared to a year ago.
Tesla, Inc. (NASDAQ:TSLA) and other electric-forward automakers, according to Wood, are a better investment than traditional automakers such as Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), which have recently joined the EV bandwagon. Wood anticipates that these traditional automakers could suffer a surprise loss next year due to the decreasing demand for gas-powered vehicles and the greater spending to transition to EVs.
Our Methodology
We chose companies in ARK Investment Management’s Q3 2021 portfolio that work in the automobile sector, from building electric vehicles to developing autonomous technology to producing materials and semiconductor chips.
The sentiment of hedge funds toward each stock was measured using data from 867 hedge funds tracked by Insider Monkey as of Q3 2021.
Cathie Wood of ARK Investment Management
Cathie Wood’s Thoughts on Automobile Industry and Her Top Car Stock Picks
10. Innoviz Technologies Ltd. (NASDAQ:INVZ)
Percentage of ARK Investment Management’s 13F Portfolio: 0%
ARK Investment Management’s Stake Value: $2,032,000
Number of Hedge Fund Holders: 13
Innoviz Technologies Ltd. (NASDAQ:INVZ) manufactures LiDAR sensors, a remote sensing technology used in autonomous vehicles. The Israel-based firm provides a range of LiDAR technologies that are used in both established and emerging industries such as trucking, robotaxis, consumer vehicles, delivery vehicles, and industrial drones.
In November 2021, Innoviz Technologies Ltd. (NASDAQ:INVZ) reported revenue of $2.1 million in its third-quarter earnings result, up 106% from the previous quarter and up 13% from a year ago. During the same period, Innoviz Technologies Ltd. (NASDAQ:INVZ) had 56 potential clients, with 9 of them in the final stages of commercial discussions.
Auto technology provider Innoviz Technologies Ltd. (NASDAQ:INVZ) is among the stocks in Cathie Wood’s portfolio in Q3 2021 along with Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN). Cathie Wood initiated her position in the LiDAR sensor manufacturer Innoviz Technologies Ltd. (NASDAQ:INVZ) in the third quarter of 2021, buying 352,816 shares of the stock worth $2.03 million.
Wood isn’t the only one who believes Innoviz Technologies Ltd. (NASDAQ:INVZ) is a good investment. Goldman Sachs analyst Mark Delaney upgraded Innoviz Technologies Ltd. (NASDAQ:INVZ) to Buy from Neutral in November. Delaney also raised his price target for the stock to $9 from $7, citing that the total addressable market for lidar hardware could exceed $5 billion by 2025 and reach $15 billion or higher by 2030.
9. Tower Semiconductor Ltd. (NASDAQ:TSEM)
Percentage of ARK Investment Management’s 13F Portfolio: 0%
ARK Investment Management’s Stake Value: $3,994,000
Number of Hedge Fund Holders: 16
Tower Semiconductor Ltd. (NASDAQ:TSEM) is an Israeli semiconductor manufacturer that plays an integral part in the automotive supply chain market. Tower Semiconductor Ltd. (NASDAQ:TSEM) offers foundry technology platforms such as image sensors, power management, and wireless communications.
The company grew its revenue in Q3 2021 by 25% year-over-year to $387 million. Tower Semiconductor Ltd.’s (NASDAQ:TSEM) automotive segment accounted for 12% of the company’s total revenue in the quarter. Investment banking group Jefferies increased its price target for Tower Semiconductor Ltd. (NASDAQ:TSEM) to $46 from $42 and maintained a Buy rating on the stock in December.
Cathie Wood cut her stake in Tower Semiconductor Ltd. (NASDAQ:TSEM) by 29%, but the star stock picker still owns 133,576 shares of the stock as of the end of September 2021. In Q3 2021, 16 hedge funds in Insider Monkey’s database hold $355 million in Tower Semiconductor Ltd. (NASDAQ:TSEM).
8. Arconic Corporation (NYSE:ARNC)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,305,000
Number of Hedge Fund Holders: 26
Among the stocks Cathie Wood holds in her $42 billion disruptive innovation portfolio together with Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN) is aluminum producer Arconic Corporation (NYSE:ARNC). Cathie Wood owns 168,202 shares of Arconic Corporation (NYSE:ARNC) worth $5.3 million, according to Q3 13F filings, representing 0.01% of her total investments for the third quarter of 2021. The Pennsylvania-based company offers aluminum materials used in manufacturing automobiles and commercial trucks.
The adjusted EBITDA of Arconic Corporation (NYSE:ARNC) in Q3 2021 was $171 million, down 9% sequentially due to continued weakness in auto manufacturing due to semiconductor supply issues, but up 4% year over year. The company’s total sales in Q3 grew 34% year over year to $1.9 billion.
As the automobile market recovers, analysts are seeing a tailwind for the aluminum sheet producer. In December, JPMorgan analyst Michael Glick upgraded his rating on Arconic Corporation (NYSE:ARNC) to Overweight from Neutral. Glick also increased his price target for the stock to $40 from $35.
Hedge funds see Arconic Corporation (NYSE:ARNC) as a potential beneficiary of the ongoing improvements in the automotive supply chain. Multinational investment firm Orbis Investment Management is a leading shareholder in Arconic Corporation (NYSE:ARNC) with over 10 million shares worth more than $318 million.
7. Kaiser Aluminum Corporation (NASDAQ:KALU)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,275,000
Number of Hedge Fund Holders: 10
Kaiser Aluminum Corporation (NASDAQ:KALU) is a California-based light aluminum producer that has been serving the automotive extrusion market for over twenty years. Some of the semi-fabricated aluminum products the company offers are driveshaft tubes, bumper extrusion, crush cans, and apron tubes.
Kaiser Aluminum Corporation (NASDAQ:KALU) delivered 20 million pounds of automotive extrusions in the third quarter of 2021, down from 24 million pounds in Q2 2021 due to a semiconductor shortage. However, as the semiconductor chip shortage subsides, Kaiser Aluminum Corporation (NASDAQ:KALU) expects its automotive sector to grow at a CAGR of 5% over the next ten years, bolstered by growth in the electric vehicle sector.
Between June and September, Cathie Wood’s ARK Investment Management increased its stake in Kaiser Aluminum Corporation (NASDAQ:KALU) by 12% bringing the fund’s total holdings to 48,413 shares worth $5.3 million.
6. AMETEK, Inc. (NYSE:AME)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,544,000
Number of Hedge Fund Holders: 38
Among the top auto stocks in Cathie Wood’s portfolio is AMETEK, Inc. (NYSE:AME), a global manufacturer of electromechanical products used in building heavy trucks and OEM car parts. Cathie Wood reduced her stake in AMETEK, Inc. (NYSE:AME) by 17% in Q3 2021, and the auto stock now accounts for 0.01% of ARK Invest’s total holdings.
AMETEK, Inc. (NYSE:AME) saw a 17% increase in organic sales and a 28% increase in revenue to $.144 billion in the third quarter of 2021. AMETEK, Inc. (NYSE:AME) acquired Alphasense, a manufacturer of gas and particle sensors, in December to expand its electronic instruments sector.
Mizuho analyst Brett Linzey initiated a Buy rating on AMETEK, Inc. (NYSE:AME) on December 16. Linzey set a $159 price target for the stock. Meanwhile, Insider Monkey’s data shows that 38 elite hedge funds held stakes in the company at the end of the September quarter.
In addition to Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN), AMETEK, Inc. (NYSE:AME) is among the stocks Cathie Wood was keeping in her portfolio in Q3 2021.
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Disclosure: None. Cathie Wood’s Thoughts on Automobile Industry and Her Top 10 Car Stock Picks is originally published on Insider Monkey.
