In this article, we discuss the Ark Invest Stock Portfolio: Top 10 Picks.
Cathie Wood, a well-known disruptive innovation investor, established ARK Investment Management in 2014 intending to create high-growth stock portfolios in the form of exchange-traded funds (ETFs). The New York-based asset management firm holds several ETFs focusing on the industries of robotics, electric vehicle, genomics, artificial intelligence, blockchain technology, space exploration, DNA sequencing, and cryptocurrency. At the end of the second quarter of 2021, ARK Investment Management had a portfolio of $53.7 billion.
ARK’s flagship fund, Ark Innovation ETF (NYSEARCA:ARKK) has a net asset value of $25.52 billion as of June 30, 2021. The fund has returned 86.59% in the past year and 48.36% annually over the last five years. Some of the top holdings included in Cathie Wood’s Ark Innovation ETF are Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc. (NYSE:TDOC), Unity Software Inc. (NYSE:U), and Roku, Inc. (NASDAQ:ROKU).
In July 2021, the hedge fund added cryptocurrency trading platform Coinbase Global, Inc. (NASDAQ:COIN) in its flagship fund. On September 21, ARK Investment Management increased its position in the crypto stock by purchasing 108,527 shares of Coinbase Global, Inc. (NASDAQ:COIN) for an approximate value of $25.87 million. As of September 27, Coinbase Global, Inc. represents 4.68% of Ark Innovation ETF, with 4,268,477 shares worth $989 million.
Ark’s strategy involves selling some of its winners to invest in more promising equities. Cathie Wood’s ARK Investment Management LLC sold 350,000 Tesla, Inc. shares in September, with a total value of $266 million, after shares of the electric vehicle manufacturer rallied.
Tesla, Inc. still makes up about 10.61% of Ark Innovation ETF, which holds 2,894,123 shares valued at $2.24 billion. Last year, when the firm reduced its Tesla, Inc. holding, Wood told CNBC that it was “wise portfolio management” to keep position sizes in check.
Our Methodology
The stocks on our list were ranked from lowest to highest weightage in Ark Investment Management’s flagship fund, Ark Innovation ETF.
We also considered the fundamentals and prospects for the growth of these stocks based on key business characteristics. We also looked at analyst ratings to give potential investors more information so they could make better investment decisions.
Data from the 873 hedge funds tracked by Insider Monkey were also used to gauge hedge fund sentiment around each stock.
Why pay attention to hedge fund sentiment while choosing stocks? 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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.
With this context in mind, here is our list of the Ark Invest Stock Portfolio: top 10 picks.
Ark Invest Stock Portfolio: Top 10 Picks
10. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holers: 26
Weight as of September 27: 3.28%
Ark Invest’s top 10 stock picks start with enterprise software developer Palantir Technologies Inc. (NYSE:PLTR). The Colorado-based software company develops platforms that are used in artificial intelligence and machine learning, data protection, IoT analytics, retail, supply chain, and health and life sciences.
Palantir Technologies Inc. saw its stock rise 11.36% on August 12 after the company reported strong second-quarter earnings and sales. Cathie Wood purchased 5.2 million shares of Palantir Technologies Inc. worth approximately $140 million following the company’s better-than-expected Q2 results.
On August 13, RBC Capital analyst Rishi Jaluria assumed a Sector Perform rating on Palantir Technologies Inc. and increased his price target for the stock to $25 from $20.
In the second quarter of 2021, Palantir Technologies Inc. reported an EPS of $0.04, beating estimates by $0.01. The company’s second-quarter revenue came in at $376 million, an increase of 49% year over year, and beat revenue estimates by $14.54 million. The stock has gained 21.3%, year to date.
At the end of the second quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $1.36 billion in Palantir Technologies Inc., down from 32 in the previous quarter worth $1.14 billion.
Just like Tesla, Inc., Coinbase Global, Inc., Unity Software Inc., and Roku, Inc., Palantir Technologies Inc. is a good stock to invest in, according to market analysts.
In the Q2 2021 investor letter of Guardian Fund, the fund mentioned Palantir Technologies Inc. and discussed its stance on the firm. Here is what the fund said:
“The success of the private sector to innovate in order to help people through the lockdowns and to produce vaccines at record speed at scale has been impressive. The fact that almost every public institution was struggling to be effective no matter how hard some of the people worked, shows the fundamental need of the public sector to become data-driven and invest in data infrastructure.
Government institutions have to partner with enterprises such as Palantir to become digital-native. The public sector will always struggle to attract the most talented engineers as compensations cannot be justified with tax money and therefore this must be a partnership with specialized private enterprises. This is a great opportunity for Palantir especially as it has already
shown to be capable of working with demanding and complex public institutions entrusting it to work on the most critical and sensitive matters.
The news section of Palantir’s website gives insight into where new business is coming from. The main opportunity is in enterprise software and the faster onboarding time and increased self-service of clients is a positive sign. We believe Palantir is becoming one of the more important global software companies.
In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”
9. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 98
Weight as of September 27: 3.35%
San Francisco-based cloud communications platform Twilio Inc. (NYSE:TWLO) ranks ninth on the list of Ark Invest’s top 10 stock picks. The company provides various communication channels and applications to improve customer engagement in an enterprise’s platform.
According to the latest data from ARK Investment Management LLC, the hedge fund owned 2.06 million shares of Twilio Inc. worth $707 million as of September 27, 2021, accounting for 3.35% of the Ark Innovation ETF.
In July, Twilio Inc. completed its $850 million acquisition of Seattle-based business text messaging software Zipwhip.
On September 16, Summit Insights analyst Srini Nandury initiated a Buy rating on Twilio Inc. with a price target of $450 per share, citing the company as a moat in the cloud communication market.
At the end of the second quarter of 2021, 98 hedge funds in the database of Insider Monkey held stakes worth $7.89 billion in Twilio Inc., down from 99 in the preceding quarter worth $5.81 billion.
Twilio Inc., along with Tesla, Inc., Coinbase Global, Inc., Unity Software Inc., and Roku, Inc., is one of the biggest holdings of Cathie Wood’s Ark Invest.
8. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 85
Weight as of September 27: 3.80%
Canadian commerce platform Shopify Inc. (NYSE:SHOP) ranks eighth on the list of Ark Invest’s top 10 stock picks. The company offers a cloud-based commerce platform to small and medium business owners internationally.
According to the latest data from ARK Investment Management LLC, the hedge fund owned 555,225 shares of Shopify Inc. worth $801 million as of September 27, 2021, accounting for 3.80% of the Ark Innovation ETF.
On July 29, Wedbush analyst Ygal Arounian kept his Outperform rating on Shopify Inc. and raised his price target for the stock to $1,800 from $1,650, citing the company’s consistent gross merchandise volume strength.
In the second quarter of 2021, Shopify Inc. reported an EPS of $2.24, beating estimates by $1.28. The company’s second-quarter revenue came in at $1.12 billion, an increase of 57% year over year, and beat revenue estimates by $69.15 million.
At the end of the second quarter of 2021, 85 hedge funds in the database of Insider Monkey held stakes worth $13.9 billion in Shopify Inc., down from 91 in the preceding quarter worth $9.98 billion.
In the Q2 2021 investor letter of Polen Capital, the fund mentioned Shopify Inc. and discussed its stance on the firm. Here is what the fund said:
“Shopify, a Canadian software company, enables merchants and entrepreneurs to run their operations efficiently. We like the focus Shopify brings to merchants. Its products allow merchants to set up an online store, manage inventory, interact with customers, accept payments, and monitor the flow of goods through various distribution channels in one centralized dashboard. Though it offers mission-critical capabilities, Shopify subtly operates in the background while allowing merchants to interact with customers.
As the world increasingly sees direct-to-consumer interactions take flight, both nascent and established brands are adopting Shopify. Today, nearly two million businesses utilize Shopify to sell more than $150 billion in merchandise across the platform. We think these numbers can grow significantly from here. Further, newer product categories like lending and fulfillment (along with a litany of other future merchant pain points we think Shopify can help solve) coupled with higher attach rates for payments could drive higher monetization of a growing user base in the coming five years. We believe Shopify can grow its earnings power at a 30% rate for the coming five years.”
7. Square, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 94
Weight as of September 27: 3.95%
Fintech giant Square, Inc. (NYSE:SQ) ranks seventh on the list of Ark Invest’s top 10 stock picks. Square, Inc. provides payment processing solutions to different enterprises. The company also manages a money transfer and trading app, Cash App, with over 40 million monthly transacting active customers as of June 2021.
On September 15, Evercore ISI analyst David Togut maintained an Outperform rating on Square, Inc. and increased his price target for the stock to $371 from $361.
Square, Inc. stock gained 1.3% in pre-market trading on September 21 after the fintech company introduced its enterprise tools and services in France.
In the second quarter of 2021, Square, Inc. reported an EPS of $0.66, beating estimates by $0.35. The company’s second-quarter revenue grew 143% year over year to $4.68 billion. The stock has gained 20.6%, year to date.
At the end of the second quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $10.3 billion in Square, Inc., up from 92 in the preceding quarter worth $9.20 billion.
Growth investors are watching Ark Invest stocks like Square, Inc., Tesla, Inc., Coinbase Global, Inc., Unity Software Inc., and Roku, Inc..
6. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 59
Weight as of September 27: 4.23%
Zoom Video Communications, Inc. (NASDAQ:ZM) ranks sixth on the list of Ark Invest’s top 10 stock picks. The California-based software company provides a video conferencing platform to clients globally.
According to the latest data from ARK Investment Management LLC, the hedge fund owned 3.28 million shares of Zoom Video Communications, Inc. worth $893 million as of September 27, 2021, accounting for 4.23% of the Ark Innovation ETF.
In the second quarter of fiscal 2022, Zoom Video Communications, Inc. reported an EPS of $1.36, beating estimates by $0.20. The company’s revenue in the second quarter grew 54% year over year to $1.02 billion and beat revenue estimates by $31.23 million.
At the end of the second quarter of 2021, 59 hedge funds in the database of Insider Monkey held stakes worth $8.48 billion in Zoom Video Communications, Inc., up from 54 in the preceding quarter worth $5.67 billion.
Zoom Video Communications, Inc. is one of the top holdings of Cathie Wood’s high-growth flagship fund together with Tesla, Inc., Coinbase Global, Inc., Unity Software Inc., and Roku, Inc..
5. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 49
Weight as of September 27: 4.68%
Coinbase Global, Inc. ranks fifth on the list of Ark Invest’s top 10 stock picks. Coinbase Global, Inc. serves as a cryptocurrency platform for over 68 million users at the end of Q2 2021.
On September 14, Piper Sandler analyst Richard Repetto reiterated an Overweight rating on Coinbase Global, Inc. with a price target of $335 per share.
In the second quarter of 2021, Coinbase Global, Inc. reported an EPS of $6.78, beating estimates by $4.09. The company’s revenue in the second quarter came in at $2.23 billion and beat revenue estimates by $345.98 million. Coinbase Global, Inc. had 8.8 million monthly transacting users in Q2 2021, up from 1.5 million users in Q2 2020.
At the end of the second quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $2.96 billion in Coinbase Global, Inc., up from 0 in the preceding quarter.
In the Q2 2021 Investor Letter, Miller Value Partners highlighted a few stocks and Coinbase Global Inc. is one of them. Here is what the fund said:
“Coinbase (COIN) became a public company in mid-April following their direct listing at a reference price of $250. Coinbase is a cryptocurrency exchange that allows consumers, financial institutions and businesses to transact between fiat and cryptocurrencies and securely store and use cryptocurrencies. We believe over the long term the company has the potential to be the leading technology platform in the growing cryptocurrency space.
COIN’s 2021 revenues are expected to be 4.5x its 2020 revenues as crypto prices and volumes have exploded. It trades at 30x this year’s earnings, which is quite a steal for a quickly growing company in this market. That’s because the market believes this is peak cycle revenues and earnings, and retail margins will be pressured. That all very well may be true, but we see significant potential for the business over the long term as the nascent industry continues to grow and COIN cements it’s position as the leading platform.”
4. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 61
Weight as of September 27: 5.28%
Roku, Inc. is a California-based TV streaming platform and it ranks fourth on the list of Ark Invest’s top 10 stock picks. Roku, Inc. markets TV streaming players where users get access to movies, news, live sports, music, and TV episodes. At the end of the second quarter of 2021, Roku, Inc. had 55.1 million active accounts.
At the end of the second quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $5.63 billion in Roku, Inc., down from 63 in the preceding quarter worth $3.78 billion.
3. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 29
Weight as of September 27: 5.32%
Unity Software Inc. ranks third on the list of Ark Invest’s top 10 stock picks. The San Francisco-based tech company offers software solutions used in creating video games, animation, and 3D data.
On August 24, Unity Software Inc. announced the completion of its acquisition of OTO, an artificial intelligence chatbot that analyzes online multiplayer gaming discussions for potential harmful conduct.
According to the latest data from ARK Investment Management LLC, the hedge fund owned 7.88 million shares of Unity Software Inc. worth $1.12 billion as of September 27, 2021, accounting for 5.28% of the Ark Innovation ETF.
In the second quarter of 2021, Unity Software Inc. reported an EPS of -$0.02, beating estimates by $0.10. The company’s second quarter-quarter revenue grew 48% year over year to $273.56 million and beat revenue estimates by $30.82 million.
At the end of the second quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $7.26 billion in Unity Software Inc., down from 39 in the preceding quarter worth $6.69 billion.
2. Teladoc Health, Inc. (NYSE:TDOC)
Number of Hedge Fund Holders: 43
Weight as of September 27: 5.66%
Teladoc Health, Inc. is a virtual healthcare company based in New York that ranks second on the list of Ark Invest’s top 10 stock picks. The company provides healthcare services on a business-to-business basis. Teladoc Health, Inc. has delivered over 10.5 million virtual health consultations last year.
On September 15, RBC Capital analyst Sean Dodge maintained an Outperform rating on Teladoc Health, Inc. with a price target of $260. According to the analyst, the virtual healthcare provider will continue to gain new customers in the following quarters.
At the end of the second quarter of 2021, 43 hedge funds in the database of Insider Monkey held stakes worth $3.57 billion in Teladoc Health, Inc., up from 42 in the preceding quarter worth $3.37 billion.
In its Q1 2021 investor letter, ClearBridge Investments mentioned Teladoc Health, Inc. and shared their insights on the company. Here is what the fund said:
“Teladoc is a leading play on telemedicine, a hyper growth market with significant opportunity for increases in utilization accelerated by the COVID19 environment. The company is well-positioned for this evolution in treatment after years of work building out its network of doctors and payors. Its recent merger with Livongo expands the company’s customer base and increases the number of products to cross-sell such as holistic, chronic disease, and second opinion services. International expansion is another significant opportunity.”
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Weight as of September 27: 10.61%
Topping the list of Ark Invest’s top 10 stock picks is American electric vehicle manufacturer Tesla, Inc.. The diversified AI company is known for manufacturing and selling top-of-the-line self-driving electric vehicles. In addition, Tesla, Inc. is also gaining momentum in its solar panel system and energy storage business.
In March 2021, ARK published research where the fund proposed a $3,000 price target for Tesla, Inc.. Meanwhile, Cathie Wood announced during a news briefing at the Morningstar Investment Conference on September 22 that she would most likely sell shares Tesla, Inc. once it achieves her five-year target of $3,000 by the end of 2022, as reported by Bloomberg.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $9.29 billion in Tesla, Inc., down from 62 in the preceding quarter worth $10.0 billion.
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This article is originally published at Insider Monkey.
