In this article, we discuss 10 stocks that Cathie Wood is not letting go of despite losses. If you want to see more stocks in this selection, click Cathie Wood is Not Letting Go of These 5 Stocks Despite Losses.
Cathie Wood, the CEO of ARK Investment Management, has been in hot water so far this year, as her hedge fund declined over 70% from its peak amid the pandemic-driven 2020 and 2021. However, she remains confident in her disruptive innovation strategy, and believes that bearing the losses now and buying even more of the fallen stocks on the dip will result in long-term gains.
Cathie Wood rose to the limelight on the back of her bullish bets on Tesla, Inc. (NASDAQ:TSLA) when the market did not believe in the company’s potential. Today, Tesla, Inc. (NASDAQ:TSLA) is inarguably a market leader in the EV space and it is well on its way to a $1 trillion valuation. Similarly, she remains bullish on innovative technology firms despite significant year to date share price losses.
In the second quarter of 2022, the ARK portfolio declined from $23 billion to around $17 billion. The hedge fund’s top buys in Q2 were DraftKings Inc. (NASDAQ:DKNG), General Motors Company (NYSE:GM), and McCormick & Company, Incorporated (NYSE:MKC), whereas, ARK reduced holdings in Baidu, Inc. (NASDAQ:BIDU), Twitter, Inc. (NYSE:TWTR), and LendingClub Corporation (NYSE:LC).
Some of the most notable stocks that Cathie Wood is holding on to despite significant losses include Shopify Inc. (NYSE:SHOP), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN).
Cathie Wood of ARK Investment Management
Our Methodology
We used Cathie Wood’s Q2 2022 13F portfolio for this analysis, selecting the stocks that have registered year to date share price losses of over 40% as of July 22, yet remain a part of the hedge fund’s top holdings.
Cathie Wood is Not Letting Go of These Stocks Despite Losses
10. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 43
YTD Share Price Decline as of July 22: 42.13%
Zoom Video Communications, Inc. (NASDAQ:ZM) is a California-based company offering a communications platform with video, voice, chat, and content sharing features. In early June, Cathie Wood predicted rather aggressively that Zoom Video Communications, Inc. (NASDAQ:ZM)’s stock price could reach $1,500 by 2026, which is more than 13-times its current levels.
Cathie Wood added Zoom Video Communications, Inc. (NASDAQ:ZM) to her portfolio in the last quarter of 2020. Her hedge fund held 9.5 million shares of the company in the second quarter of 2022, worth more than $1 billion, representing 6.08% of the total portfolio. Despite a 42% year to date loss, Zoom Video Communications, Inc. (NASDAQ:ZM) remains the second largest holding of Cathie Wood, with ARK adding 14% to its position in the June quarter.
On July 19, Bernstein analyst Peter Weed initiated coverage of Zoom Video Communications, Inc. (NASDAQ:ZM) with a Market Perform rating and a $122 price target. The analyst observed that although post-pandemic growth seems risky, he thinks competitive concerns are unnecessary. He added that he believes Zoom Video Communications, Inc. (NASDAQ:ZM) has lower recession risk compared to others in the industry.
According to Insider Monkey’s data, Zoom Video Communications, Inc. (NASDAQ:ZM) was part of 43 public hedge fund portfolios in Q1 2022, compared to 48 funds in the last quarter. Jim Simons’ Renaissance Technologies is a prominent shareholder of the company, with 6.4 million shares worth $986.4 million.
In addition to Shopify Inc. (NYSE:SHOP), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN), elite hedge funds are monitoring Zoom Video Communications, Inc. (NASDAQ:ZM).
Here is what Horos Asset Management has to say about Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2022 investor letter:
“What about the other asset class that has attracted the most attention from the investment community in recent times? Here we can distinguish three major groups. First, those companies without earnings that had convinced investors of their great future growth prospects, pushing up their valuations to irrational levels. A clear example of this, which we mentioned almost two years ago (see here) is Zoom Video Communications (“Zoom”), whose market cap exceeded that of companies such as IBM or came close to that of Cisco Systems. Well, from the time we wrote about this odd situation until today, Zoom shares have collapsed nearly 80%.
Therefore, if interest rates rise (or are expected to rise), company valuations are negatively impacted. This is especially true for those businesses that generate little cash today and the market expects them to generate a lot of cash in the future. Hence the severe losses in companies that promised a lot of cash generation in the future (such as Zoom).”
9. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 34
YTD Share Price Decline as of July 22: 61.93%
Roku, Inc. (NASDAQ:ROKU) is a California-based company that offers a TV streaming platform. On July 20, Netflix posted Q2 results that exceeded expectations, which triggered share price gains in the streaming TV market. Consequently, Roku, Inc. (NASDAQ:ROKU) stock gained 8%.
In Q2 2022, Cathie Wood added 23% to her existing Roku, Inc. (NASDAQ:ROKU) position. ARK Investment Management held over 10 million Roku, Inc. (NASDAQ:ROKU) shares, worth $962.7 million, representing 5.69% of the total holdings. Cathie Wood has maintained a stake in the company since Q2 2019. The stock has plummeted about 62% year to date, yet it remains a top holding of Cathie Wood.
JPMorgan analyst Cory Carpenter on July 22 reiterated an Overweight rating on Roku, Inc. (NASDAQ:ROKU) but lowered the price target on the stock to $150 from $175. Ahead of the Q2 results, the analyst slashed estimates for Roku, Inc. (NASDAQ:ROKU), citing macro challenges. He lowered his growth forecast for Roku, Inc. (NASDAQ:ROKU) to 30% year-over-year in 2022, which still implies acceleration in the second half of the year but is less than the 35% guidance put forward by the company management.
Among the hedge funds tracked by Insider Monkey, 34 funds were long Roku, Inc. (NASDAQ:ROKU) at the end of March 2022, compared to 43 funds in the prior quarter. D E Shaw, a prominent shareholder, owned a $76.3 million stake in the company.
Here is what RGA Investment Advisors has to say about Roku, Inc. (NASDAQ:ROKU) in its Q4 2021 investor letter:
“Since we bought Roku, no stock has contributed more to our returns and no stock has been more volatile in our portfolio. This is now our third drawdown in the stock of over 30% and our second of over 60%. Fortunately (or tactically) before the two 60% drawdowns we had trimmed our positions by at least a third, though unfortunately that meant we still held large slices of the stock on the way down. Despite the stock having soared too far, too fast and thinking it was due for a period of digestion, we believe over our time frame even the former highs will be rewarded with a good result. We have often pointed out that volatility in companies like Roku is the market’s way of grappling with a really wide range of potential outcomes and that remains as true today as ever, though the range of outcomes continues to narrow for the better for Roku.
Roku today is trading at lower multiples than at any point as a public company, meanwhile its revenue and margin composition has evolved from majority hardware to vast majority platform– in other words, each $1 of revenue is much more valuable today than ever before for Roku. Roku today is a profitable company for the first time in its history. Roku today has a multitude of investment opportunities within its own platform that can drive considerable value. Early in 2021 at higher prices, one had to believe the company would grow accounts internationally to justify valuations. This was so, because the company has so quickly achieved substantial penetration of the US market with 56.4m reported household customers of the ~130m total US households, that further growth in the US household count will be challenging and because prices were so high. Today, one merely needs to believe that with around 60 million households (the expectation for the yet reported year-end 2021 number), ARPU has a strong enough growth tailwind to reach $100 within a reasonable time, without relying on any incremental account growth. For context, as of Q3 this year, ARPU was $40, up 49% year-over-year and we know it will be higher in Q4. Growth in ARPU is underpinned by the continuing migration of viewer hours to CTV. The subforces behind this are increasing the penetration of Roku devices within households (go from one Roku to TV to 2-4), increasing the hours that each house watches (getting from shy of 4 hours to the nearly 8 hours an average American household watches TV) and broadening the content on the platform, increasing the share of inventory with content companies and more hours (like live sports viewing) shifting from linear to CTV. We further believe the opportunity to become the bundler and/or hub of household content subscriptions is growing, as evidenced by the rise in credit card pings per user from 1 to 1.3 per month and its continuing ascension. In this respect, Roku has the right to win with their installed base, because the experience is exponentially better than legacy and competing offerings…” (Click here to see the full text)
8. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 84
YTD Share Price Decline as of July 22: 56.03%
Block, Inc. (NYSE:SQ) is an American financial services and digital payments company. Cathie Wood added Block, Inc. (NYSE:SQ) to her portfolio in the last quarter of 2016, and has consistently held the stock over the years, apart from two quarters. In Q2 2022, Cathie Wood boosted her Block, Inc. (NYSE:SQ) stake by 10%, holding over 9 million shares worth $799.45 million. The stock has declined about 56% year to date.
Wolfe Research analyst Darrin Peller on July 20 reiterated an Outperform rating on Block, Inc. (NYSE:SQ) but lowered the price target on the shares to $85 from $90 ahead of Q2 earnings season. His base case factored in a mild recession in 2023 for the Payments, Processors, and IT Services space, the analyst told investors. While the analyst said that recession fears and the possible effect on Block, Inc. (NYSE:SQ)’s different businesses may concern some investors in the short-term, he continues to see Block, Inc. (NYSE:SQ) as a significant share gainer across its businesses and reaffirmed that it is a long-term growth play.
In the first quarter of 2022, 84 hedge funds were bullish on Block, Inc. (NYSE:SQ), down from 96 funds in the previous quarter. Brian Bares’ Bares Capital Management is a prominent shareholder of the company, with 6.2 million shares worth over $842 million.
Here is what Farrer Wealth Advisors has to say about Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter:
“Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”
7. Exact Sciences Corporation (NASDAQ:EXAS)
Number of Hedge Fund Holders: 32
YTD Share Price Decline as of July 22: 44.24%
Exact Sciences Corporation (NASDAQ:EXAS) is a Wisconsin-based company that specializes in cancer screening and diagnostic test products in the United States and internationally. The stock has dropped over 44% year to date. However, Cathie Wood is not letting go of Exact Sciences Corporation (NASDAQ:EXAS) despite losses. Her ARK portfolio had almost 15 million Exact Sciences Corporation (NASDAQ:EXAS) shares at the end of June, worth $745.7 million. The hedge fund strengthened its hold on the company by 5% in Q2 2022.
Evercore ISI analyst Vijay Kumar on July 5 reiterated an Outperform rating on Exact Sciences Corporation (NASDAQ:EXAS) but lowered the price target on the shares to $60 from $100. The analyst also added Exact Sciences Corporation (NASDAQ:EXAS) to the firm’s “Tactical Outperform” list heading into the earnings season for the Life Science Tools and MedTech groups.
According to Insider Monkey’s data, 32 hedge funds were bullish on Exact Sciences Corporation (NASDAQ:EXAS) at the end of Q1 2022, compared to 34 funds in the preceding quarter. Ricky Sandler’s Eminence Capital is a prominent stakeholder of the company, with 2.2 million shares worth over $157 million.
Like Shopify Inc. (NYSE:SHOP), Teladoc Health, Inc. (NYSE:TDOC), and Coinbase Global, Inc. (NASDAQ:COIN), Cathie Wood remains optimistic about Exact Sciences Corporation (NASDAQ:EXAS) despite losses.
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.”
6. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 46
YTD Share Price Decline as of July 22: 71.69%
Coinbase Global, Inc. (NASDAQ:COIN) is a provider of financial infrastructure and technology for the crypto industry in the United States and internationally. Although the stock has fallen about 72% from its peak due to the crypto crash, in the June quarter, Cathie Wood boosted her Coinbase Global, Inc. (NASDAQ:COIN) stake by 29%. Her hedge fund held approximately 9 million shares of the company worth $699 million.
DA Davidson analyst Christopher Brendler on July 14 maintained a Buy recommendation on Coinbase Global, Inc. (NASDAQ:COIN) but lowered the firm’s price target on the shares to $90 from $135. The analyst said that while his slashed price target reflects declining trading volumes, Coinbase Global, Inc. (NASDAQ:COIN) should be able to successfully overcome short-term headwinds and come out stronger when the next crypto rally begins.
Among the hedge funds tracked by Insider Monkey, 46 funds were bullish on Coinbase Global, Inc. (NASDAQ:COIN) at the end of Q1 2022, down from 57 funds in the earlier quarter.
Here is what Longleaf Partners Fund has to say about Coinbase Global, Inc. (NASDAQ:COIN) in its Q4 2021 investor letter:
“We also have seen plenty of IPO/SPAC craziness showing both that private players need public markets more than they admit and that there is more volatility embedded in these newer companies than a private quarterly mark might admit. As for how efficient both the private and public markets are, we would encourage you to really delve into some of those multi-hundred-page S1s for many of the newest public companies to see the huge gap between the last valuation at which the company was funded and/or granted shares to its executives and the often much higher price at which the company went public – Coinbase is a prime example.”
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Disclosure: None. Cathie Wood is Not Letting Go of These 10 Stocks Despite Losses is originally published on Insider Monkey.
