In this article, we discuss 10 Cathie Wood stocks that can rebound in Q4.
Cathie Wood, the CEO of ARK Investment Management, is often the talk of Wall Street due to her bold market moves and stock forecasts. Cathie Wood’s ARK portfolio took a heavy beating amid the mass selloff in growth stocks in 2022, and the fund is down about 55% year to date. However, Wood remains adamant in her stock holdings, since she believes that the investment horizon for her growth portfolio to generate notable returns is at least five years. She continues to double down on her bullish bets, despite the stocks plummeting largely this year.
On August 23, Cathie Wood purchased more than 800,000 shares of Zoom Video Communications, Inc. (NASDAQ:ZM) worth $68.25 million, as the stock reached its pre-pandemic levels. Bloomberg data suggests that Wood also either owns or has previously owned options of Zoom. In June, Wood predicted a $1,500 price target for Zoom Video Communications, Inc. (NASDAQ:ZM) by 2026 and a minimum of $700 in case of a bearish scenario. She said that over the next five years, hybrid and remote work models are likely to prevail, which will be a positive catalyst for Zoom Video Communications, Inc. (NASDAQ:ZM). The stock is down about 56% year to date as of August 23, but Cathie Wood is loading up on the shares as she sees it rebounding soon. ARK also added 14% to its position in Zoom Video Communications, Inc. (NASDAQ:ZM) during Q2 2022.
Similar to Wood’s Zoom Video Communications, Inc. (NASDAQ:ZM) bet, the ARK portfolio has multiple stocks which have been beaten down since the beginning of 2022 due to the mass selloff in growth plays. However, Cathie Wood believes that her fund has bottomed, and as the economy begins to rebound in the later half of 2022, her stocks shall make a recovery. Some of the Cathie Wood stocks that can rebound in Q4 include StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG).
Our Methodology
We used the Q2 2022 portfolio of Cathie Wood’s ARK Investment Management for this analysis, selecting the stocks that are down in 2022, yet Wood remains bullish on them as she sees long-term potential. These stocks can begin to rebound as soon as Q4 2022. We have ranked the list according to the hedge fund sentiment around the securities, which was measured from Insider Monkey’s database of about 900 elite hedge funds as of the second quarter of 2022.
Cathie Wood of ARK Investment Management
Cathie Wood Stocks that Can Rebound in Q4
10. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 20
Share Price Decline YTD as of August 23: 28.35%
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a California-based company that works as a contractor for the U.S. Department of Defense. The company operates through two segments, Kratos Government Solutions and Unmanned Systems. Cathie Wood’s ARK Investment Management owned 8.2 million shares of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) in the second quarter of 2022, worth $118.6 million, representing 0.70% of the total 13F securities.
With the Russia Ukraine war escalating geopolitical tensions globally, and now the impact of the China-Taiwan situation threatening to spill over in the United States after House Speaker Nancy Pelosi’s Taiwan tour, security and defense stocks like Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) are likely to be highly demanded and rebound as soon as Q4. On August 4, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) reported its Q2 results, with an EPS of $0.07 and a revenue of $224.20 million, outperforming market consensus by $0.03 and $13.63 million, respectively. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) also secured two contracts for aerial target drone systems on August 8 and August 9, collectively worth $34 million.
According to Insider Monkey’s data, 20 hedge funds were bullish on Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) at the end of June 2022, up from 17 funds in the earlier quarter. D E Shaw is a notable stakeholder of the company, with 1.26 million shares worth $17.5 million.
Like StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG), Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is one of the Cathie Wood stocks that can rebound in Q4.
9. Archer Aviation Inc. (NYSE:ACHR)
Number of Hedge Fund Holders: 22
Share Price Decline YTD as of August 23: 40.84%
Archer Aviation Inc. (NYSE:ACHR) was incorporated in 2018 and is headquartered in Palo Alto, California. The company designs and manufactures electric vertical takeoff and landing aircrafts to carry passengers. Cathie Wood owns more than 10 million shares of Archer Aviation Inc. (NYSE:ACHR) as of Q2 2022, worth $42.5 million.
On August 10, Archer Aviation Inc. (NYSE:ACHR) said it is progressing in its commercialization efforts and proceeding the development and certification of the Midnight production aircraft. The company is also beginning efforts to make an early launch for its commercial operations. United Airlines Holdings, Inc. (NASDAQ:UAL) backs Archer Aviation Inc. (NYSE:ACHR)’s commercialization plan, as the company made a $10 million pre-delivery payment. Archer Aviation Inc. (NYSE:ACHR) stock has gained more than 13% over the last month as of August 23, and it can gain more by Q4 as the company works towards an early launch.
Deutsche Bank analyst Edison Yu on August 16 raised the price target on Archer Aviation Inc. (NYSE:ACHR) to $12 from $10 and maintained a Buy rating on the shares. After Q2 earnings from the eVTOL group, the analyst is increasingly confident that Archer Aviation Inc. (NYSE:ACHR) is “making fast and underappreciated progress” towards launching an eVTOL.
According to Insider Monkey’s database, 22 hedge funds were bullish on Archer Aviation Inc. (NYSE:ACHR) at the end of the second quarter of 2022, compared to 28 funds in the prior quarter. Sculptor Capital is the leading position holder in the company, with 2.90 million shares worth $28.5 million.
8. Fate Therapeutics, Inc. (NASDAQ:FATE)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 50.31%
Fate Therapeutics, Inc. (NASDAQ:FATE) is headquartered in San Diego, California, operating as a clinical-stage biopharmaceutical company. Fate Therapeutics, Inc. (NASDAQ:FATE) specializes in programmed cellular immunotherapies for cancer and immune disorders. In Q2 2022, Cathie Wood strengthened her hold on Fate Therapeutics, Inc. (NASDAQ:FATE) by 5%. Her ARK portfolio featured about 11.5 million shares of the company worth $265 million, representing 12.26% of the total securities. As of August 23, the stock is down about 50% year to date.
On August 18, Wells Fargo analyst Nick Abbott assumed coverage of Fate Therapeutics, Inc. (NASDAQ:FATE) with an Overweight rating but lowered the price target to $90 from $125. The analyst sees two main upcoming catalysts in Q4 with risk/reward profiles that are positively skewed for Fate Therapeutics, Inc. (NASDAQ:FATE). These include FT536/538’s solid tumor data at SITC with early responses that could result in a $10 per share upside, and updates for FT538 and FT516/596 in liquid tumors that might help elevate Fate Therapeutics, Inc. (NASDAQ:FATE) by $3 per share.
According to Insider Monkey’s data, 23 hedge funds were long Fate Therapeutics, Inc. (NASDAQ:FATE) at the end of June 2022, compared to 31 funds in the earlier quarter. Jeremy Green’s Redmile Group is the largest stakeholder of the company, with almost 13 million shares worth $321 million.
7. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 67.29%
Unity Software Inc. (NYSE:U) is a San Francisco-based company that operates an interactive real-time 3D content platform. Its platform is utilized by content creators, developers, artists, designers, engineers, and architects. ARK Investment Management added 12% to its existing Unity Software Inc. (NYSE:U) stake in Q2 2022. The fund owned more than 9 million shares worth $366.75 million in the June quarter.
Citi analyst Jason Bazinet on August 18 maintained a Buy rating on Unity Software Inc. (NYSE:U) but lowered the price target on the shares to $61 from $68. The analyst updated his model to factor in Unity Software Inc. (NYSE:U)’s Q2 results. He believes any of the potential transactions “are apt to be positive for Unity shareholders”. If the ironSource Ltd. (NYSE:IS) or AppLovin Corporation (NASDAQ:APP) transactions materialize, positive free cash flow will be achieved sooner, the analyst told investors in a research note. If an “interloper” other than ironSource or AppLovin acquires Unity Software Inc. (NYSE:U), shareholders stand to receive a takeover premium, said the analyst.
According to Insider Monkey’s data, 23 hedge funds were long Unity Software Inc. (NYSE:U) at the end of Q2 2022, compared to 39 funds in the earlier quarter. Silver Lake Partners is the biggest stakeholder of the company, with roughly 35 million shares worth $1.28 billion.
Here is what ClearBridge Investments All Cap Growth Strategy has to say about Unity Software Inc. (NYSE:U) in its Q1 2022 investor letter:
“We took advantage of a correction in higher-multiple stocks early in the first quarter to purchase shares of Unity Software (NYSE:U), a leading platform to create, run and monetize 3D content. With about 1.6 million monthly active creators versus roughly 15 million potential content creators in gaming alone, we believe the company’s Create Engine is still under penetrated relative to its core addressable market. We similarly see a long runway for growth in Unity’s Operate Solutions segment given its advertising network commands single-digit share of the $60 billion mobile app install ad market today. Furthermore, we believe Unity is well-positioned to expand its addressable market to include industries beyond gaming, on both the operate and create sides of their business (Exhibit 1). The company is not yet free cash flow positive but given strong net expansion rates and high gross margins, we see a path to improving profitability over time, with management notably targeting positive free cash flow this fiscal year.”
6. Schrödinger, Inc. (NASDAQ:SDGR)
Number of Hedge Fund Holders: 23
Share Price Decline YTD as of August 23: 19.96%
Schrödinger, Inc. (NASDAQ:SDGR) is a New York-based company that offers a physics-based software platform, enabling the discovery of novel molecules for drug development and materials applications. Cathie Wood’s ARK Investment Management owns about 3 million shares of Schrödinger, Inc. (NASDAQ:SDGR) as of Q2 2022, worth $76.3 million, representing 1.04% of the total 13F securities. Piper Sandler analyst Do Kim on July 26 raised the price target on Schrödinger, Inc. (NASDAQ:SDGR) to $86 from $84 and kept an Overweight rating on the shares.
In Q2, the company reported a revenue of $38.5 million, up 29.2% year over year, outperforming market consensus by $3.02 million. Schrödinger, Inc. (NASDAQ:SDGR) reaffirmed its full-year 2022 guidance despite mixed Q2 results. The total revenue is expected to range from $161 million to $181 million, compared to a consensus of $175.39 million. This represents a 17% to 31% growth over 2021. For the third quarter of 2022, software revenue is projected to lie between $23 million to $25 million. The stock can potentially recover in Q4 as revenue grows, in both software and drug discovery segments.
According to Insider Monkey’s database, Schrödinger, Inc. (NASDAQ:SDGR) was part of 23 hedge fund portfolios at the end of Q2 2022, compared to 22 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the leading shareholder of the company, with approximately 7 million shares worth $184.3 million.
In addition to StoneCo Ltd. (NASDAQ:STNE), Shopify Inc. (NYSE:SHOP), and DraftKings Inc. (NASDAQ:DKNG), Schrödinger, Inc. (NASDAQ:SDGR) is one of the beaten down Cathie Wood stocks that can make a recovery soon.
Here is what Baron Growth Fund has to say about Schrödinger, Inc. (NASDAQ:SDGR) in its Q3 2021 investor letter:
“Schrodinger, Inc. is a hybrid biotechnology and technology company that uses molecular dynamics and free energy perturbations to model drug/target interactions for both third parties and its own internal efforts. Shares fell following second quarter financial results in which the company did not raise guidance and noted that revenue was weighted toward the fourth quarter. As we focus on company fundamentals and not these types of short-term issues, we remain shareholders.”
5. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 27
Share Price Decline YTD as of August 23: 38.21%
DraftKings Inc. (NASDAQ:DKNG) is a Massachusetts-based digital sports entertainment and gaming company. DraftKings Inc. (NASDAQ:DKNG) stock has gained more than 27% in the last month as of August 23. However, it is still down 38% YTD. The shares rallied amid strong earnings for the second quarter, with a revenue of $466 million, up 56% from last year. This outperformed analyst estimates by $28 million. DraftKings Inc. (NASDAQ:DKNG) reported that average monthly unique B2C customers increased to 1.5 million in Q2, a jump of 30% compared to the same period last year. Securities filings for the second quarter of 2022 reveal that Cathie Wood’s ARK Investment Management owned 25.2 million shares of DraftKings Inc. (NASDAQ:DKNG), worth about $342.5 million, representing 2.02% of the total 13F portfolio.
On August 8, Morgan Stanley analyst Ed Young reiterated an Overweight rating on DraftKings Inc. (NASDAQ:DKNG) and lowered the price target on the shares to $30 from $31 after the company’s Q2 revenues and EBITDA exceeded his estimates by 7% and 35%, respectively. Management seems intent on reducing losses and the analyst lowered his own FY22 EBITDA loss estimate by 8%, informing investors that the “strong quarter” made him more confident in DraftKings Inc. (NASDAQ:DKNG)’s execution. Similarly, on August 17, Roth Capital analyst Edward Engel upgraded DraftKings Inc. (NASDAQ:DKNG) to Buy from Neutral with a price target of $25, up from $18.
Among the hedge funds tracked by Insider Monkey, 27 funds were long DraftKings Inc. (NASDAQ:DKNG) at the end of Q2 2022, with collective stakes worth over $682 million. HG Vora Capital Management is a prominent stakeholder of the company, with 2.5 million shares worth over $29 million.
Here is what Baron Small Cap Fund has to say about DraftKings Inc. (NASDAQ:DKNG) in its Q4 2021 investor letter:
“Shares of DraftKings, Inc. fell in the quarter, as stocks of online gaming companies were under pressure. Sports betting and i-gaming are rolling out with great fanfare and success across the country; however, investors seem concerned about competition and margins. Most participants are spending heavily on marketing and promotions, which is cutting into margins. We see this as a worthy investment in customer acquisition at a moment in time when revenues are just building. We continue to believe that online sports betting and gaming will be enormous industries, and that DraftKings will be a leading player. We think the business will have high margins as it matures. We believe we are underwriting the business conservatively and see much upside in the long term.”
4. Exact Sciences Corporation (NASDAQ:EXAS)
Number of Hedge Fund Holders: 28
Share Price Decline YTD as of August 23: 55.80%
Exact Sciences Corporation (NASDAQ:EXAS) is an American provider of cancer screening and diagnostic test products. ARK Investment Management boosted its stake in Exact Sciences Corporation (NASDAQ:EXAS) by 5% in Q2 2022, holding about 15 million shares worth $745.7 million, representing 4.41% of the total 13F portfolio. The stock has plummeted about 56% year to date as of August 23.
On August 3, Craig-Hallum analyst Alex Nowak reaffirmed a Buy recommendation on Exact Sciences Corporation (NASDAQ:EXAS) but lowered the price target on the shares to $60 from $81. The company provided optimistic comments in its Q1 call and delivered an equally impressive Q2, the analyst noted. Cologuard and Precision Oncology generated sales upside, while COVID sales were in line. The analyst likes the long-term vision of Exact Sciences Corporation (NASDAQ:EXAS) in oncology, though short-term he is “left without a call after a more jumbled quarter”. Piper Sandler analyst David Westenberg on August 17 maintained an Overweight rating on the stock and lowered the price target on the shares to $40 from $50. The analyst updated models in the genomic tools and labs space after earnings.
Among the hedge funds tracked by Insider Monkey, 28 funds were bullish on Exact Sciences Corporation (NASDAQ:EXAS) at the end of June 2022, compared to 32 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 2.5 million shares worth about $100 million.
Here is what RiverPark Large Growth Fund has to say about Exact Sciences Corporation (NASDAQ:EXAS) in its Q4 2021 investor letter:
“Exact Sciences: EXAS shares declined on a disappointing recovery in Cologuard screening due to COVID. Despite continued revenue growth from Precision Oncology and COVID testing, and Cologuard screening revenue growth of 30%, COVID restrictions limited access to physicians’ offices for the company’s and its Pfizer Joint Venture sales force as well as causing a severe drop off of in-person wellness visits.
In the last year, Exact has also pivoted the company significantly from its single cancer screening tests (Cologuard for colon cancer and Oncotype for breast cancer) to multi-cancer screening through its Thrive acquisition, and to minimal residual disease and recurrence monitoring through its Ashion and Tardis acquisitions. Through this pivot, Exact has tripled its market opportunity from $20 billion to $60 billion.”
3. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA)
Number of Hedge Fund Holders: 29
Share Price Decline YTD as of August 23: 68.87%
Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) is a Massachusetts-based company that operates a platform for cell programming. The platform is used to program cells for novel therapeutics, food ingredients, and chemicals derived from petroleum. Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) stock has plunged about 69% year to date as of August 23. However, the stock has potential to rebound as soon as Q4 as given the importance of cell programming in agriculture to combat the global shortage of food, among other important use cases.
On August 16, Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) stock rose about 21% as the company reported its Q2 2022 results, which included a topline beat and a raised guidance. The company lifted its 2022 revenue outlook to $425 million to $440 million from $375 million to $390 million, which is also above the Street consensus.
Raymond James analyst Rahul Sarugaser on August 16 raised the price target on Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) to $14.50 from $11.50 and kept an Outperform rating on the shares. The company posted Q2 earnings, featuring significant beats on revenue and adjusted EBITDA, leading Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) to raise its guidance for FY22, the analyst told investors. He is optimistic about Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) adding 13 new sector-diversified programs this quarter, reinforcing his confidence that the company should meet its target of 60 new programs added this year.
According to Insider Monkey’s Q2 data, Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) was part of 29 hedge fund portfolios, compared to 30 funds in the earlier quarter.
2. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 30
Share Price Decline YTD as of August 23: 52.17%
StoneCo Ltd. (NASDAQ:STNE) provides financial technology solutions to merchants for conducting e-commerce across in-store, online, and mobile channels in Brazil. In Q2 2022, Cathie Wood’s ARK portfolio had 2.6 million StoneCo Ltd. (NASDAQ:STNE) shares worth $26.5 million. The stock has plummeted about 52% year to date as of August 23. However, the company reported growth in Q2 2022 and expects Q3 revenue and earnings to increase from Q2 levels.
Susquehanna analyst James Friedman on August 23 said StoneCo Ltd. (NASDAQ:STNE) posted solid Q2 results as TPV growth outperformed estimates. The analyst maintained his price target but raised his TPV growth estimate from 16% to 24%. He reaffirmed his Positive rating and a $20 price target on StoneCo Ltd. (NASDAQ:STNE) shares.
According to Insider Monkey’s data, StoneCo Ltd. (NASDAQ:STNE) was part of 30 hedge fund portfolios at the end of June 2022, compared to 43 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with roughly 10.7 million shares worth $82.3 million.
Here is what Nordstern Capital has to say about StoneCo Ltd. (NASDAQ:STNE) in its Q2 2022 investor letter:
“‘To grow its customer base, X.com had been giving out lines of credit to prospective customers, part of its plan for a full suite of financial services products. But with X.com expanding as fast as it had, appropriate underwriting had taken a back seat.’ – Jimmy Soni, in ‘The Founders’
StoneCo Ltd. (Stone) today is seen as a payment provider with lower margins than its peers in a structurally difficult environment in Brazil: strong competition, declining take rates, increasing funding costs. The last two quarterly updates indicated improvement in all business lines for Stone and management did forecast further margin increases throughout all of 2022. In contrast to the other payment providers, Stone also has a sizable software business. In addition, Stone is working towards becoming a full-fledged financial services provider. Both endeavors add costs to the P&L, but do not yet add meaningful profits, which is about to change. Particularly the lending business could become bigger and more profitable than the current bread-and-butter payments business. However, the lending business was suspended last year after experiencing issues that resemble those of the early PayPal from more than two decades ago (“X.com” was renamed “PayPal” in 2001)…” (Click here to see the full text)
1. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 60
Share Price Decline YTD as of August 23: 76.13%
Shopify Inc. (NYSE:SHOP) is a Canadian e-commerce company. In the second quarter of 2022, Cathie Wood increased her stake in Shopify Inc. (NYSE:SHOP) by 35%, holding 1.2 million shares worth $455.20 million, representing 2.69% of the total 13F securities. Shopify Inc. (NYSE:SHOP) stock is down 76% year to date as of August 23. However, the increase in consumer spending after July’s inflation data can make the stock rebound as soon as Q4.
On August 11, Atlantic Equities analyst Kunaal Malde upgraded Shopify Inc. (NYSE:SHOP) to Overweight from Neutral with a $46 price target. Shopify Inc. (NYSE:SHOP) remains “a market leader in product innovation and a high-quality market share gainer”, said the analyst, who sees upside to estimates after the latest reset. GMV estimates are now “seemingly more conservative for Shopify than most peers”, leading him to see upside to consensus.
According to Insider Monkey’s database, Shopify Inc. (NYSE:SHOP) was part of 60 hedge fund portfolios at the end of Q2 2022, compared to 72 funds in the earlier quarter. Jim Simons’ Renaissance Technologies is a significant position holder in the company, with 14 million shares worth about $438.50 million.
Here is what Rowan Street has to say about Shopify Inc. (NYSE:SHOP) in its Q2 2022 investor letter:
“Tobias Lutke, Shopify (NYSE:SHOP) Founder and CEO
When Tobias Lütke opened an online snowboarding store in 2004, he realized how painfully cumbersome e-commerce software was. So he decided to create Shopify – a platform that made it easy for anyone to open up an online store.
Tobi has built Shopify into one of the most popular e-commerce platforms in the world, with $175 billion in GMV (Gross Merchandise Value) and $4.6 billion in revenues in 2021. SHOP went public in 2015, when revenues were just slightly above $200 million, and the stock is up 1,233% since its IPO. Shopify stock peaked in November 2021 (traded at astronomical 47x sales), which coincided with peak enthusiasm for the tech-driven, “stay-home” stocks. Since then, the stock is down almost 80% and is currently trading at just 6x 2023E sales. We believe that Mr. Market is offering us an exceptional value, at current price levels, for an exceptional company led by a very talented, visionary founder/CEO.”
You can also take a look at 10 Crypto Companies Hit By the Recent Crash and 10 Best Dividend Stocks to Buy in 2022.
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Disclosure: None. 10 Cathie Wood Stocks that Can Rebound in Q4 is originally published on Insider Monkey.
