In this piece, we will take a look at the seven newest additions to Cathie Wood’s latest stock portfolio. If you want to skip our introduction to the investor, and want to take a look at the top five stocks in this list, then head on over to Cathie Wood Stock Portfolio: 5 Newest Stock Picks This Year.
Cathie Wood is an American investor who is in charge of running the affairs of the investment firm Ark Investment Management. Ms. Wood set up her fund in 2014, which makes her fund one of the most successful players due to its large portfolio size but relatively young age in an industry filled with companies that have been investing for decades.
Prior to setting up Ark, Ms. Wood spent a considerable amount of time working in the industry. She comes from a military background and is a graduate of the University of California, from which she graduated in 1974 with a bachelor’s degree in finance and economics. After graduating, Ms. Wood would go on and join one of the largest financial services firms in the world, Capital Group. She would work at the firm for three years and then head on to New York City for one of the longest stints of her career when she would spend 18 years working for an asset management firm.
Her second attempt at setting up an investment firm would follow in 2014 when Ms. Wood would leave AllianceBernstein to focus on companies spearheading a concept called ‘disruptive innovation.’ This term, developed by a Harvard professor, is used primarily to explain the rise of companies such as Apple, which managed to upend the status quo through revolutionary products such as the iPhone.
Over the years, her hedge fund has become one of the largest players in the industry, and as of the third quarter of this year, its portfolio was worth a whopping $14 billion. However, 2022 has proven to be one of the toughest ones in Ms. Wood’s career, as her focus on disruptive firms, especially those in the technology sector, has coincided with Wall Street becoming risk averse in the aftermath of large interest rate hikes from the Federal Reserve.
These, according to the Fed, are necessary to bring down inflation, but Ms. Wood disagrees with the bank as she believes that the data points it is using to assess inflation are out of touch with reality. According to her, while the Fed is looking at consumer facing inflation for its decisions, prices have already started to drop upstream in the supply chain. She also argues that the prices for a host of commodities such as gold, silver, lumber, iron ore, DRAM, copper, oil, and corn are significantly down both year to date and since their peak highs.
In an open letter that she penned in October 2022, Ms. Wood summed up her thoughts:
The Fed seems focused on two variables that, in our view, are lagging indicators––downstream inflation and employment––both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates. During September and early October, the Fed felt vindicated in its tough stance by reports that inflation as measured by both the CPI and PCE Deflator excluding food and energy increased 0.6% (7~-8% annualized) and that the PPI excluding food and energy increased 0.4% (~5% annualized). Including food and energy, the CPI increased and the PPI fell 0.1% (~1% annualized), however, while home prices as measured by the Federal Housing Finance Agency (FHFA) fell 0.6% (~7-8% annualized). Reported on the employment front during September and early October, initial claims for unemployment insurance declined and nonfarm payroll employment increased 263,000, but job openings as measured by JOLTS fell 10% or 1.1 million, manufacturing employment as measured by the ISM Purchasing Managers Index contracted, and Challenger involuntary job separations soared 67.6% on a year-over-year basis.
Cathie Wood’s hedge fund has posted its 13F filings with the SEC for the third quarter of this year. Some of the notable names in the portfolio include Tesla Inc (NASDAQ:TSLA), NVIDIA Corporation (NASDAQ:NVDA) and Zoom Video Communications Inc (NASDAQ:ZM). In this article, however, our focus would be the stocks Cathie Wood initiated new stakes in during the September quarter.
Cathie Wood of ARK Investment Management
Our Methodology
We scanned the third quarter portfolio of Cathie Wood and picked the stocks in which she initiated new stakes during the September quarter.
Cathie Wood Stock Portfolio: 7 Newest Stock Picks This Year
7. Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA)
Ark Investment’s Stake Value: $1.8 million
Percentage of Ark Investment’s 13F Portfolio: 0.01%
Number of Hedge Fund Holders: N/A
Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA), simply known as Michelin, is one of the largest tire manufacturers in the world. The firm is headquartered in Clermont-Ferrand, France, and it is one of the oldest companies in the world after being set up in 1889.
Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA) was responsible for manufacturing the tires for NASA’s Space Shuttle – highlighting its prowess in the industry due to the extreme requirements for the tires of a spacecraft that is returning from space. Alongside the Shuttle, Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA) has also manufactured tires for Formula One race cars, endurance racing, and the World Rally Championship.
However, tires are not the only industry where Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA) operates. The firm is also renowned for its tour guides, and its three Michelin Start rating is highly coveted in the restaurant industry. It also has a digital mapping service, and the firm’s market data for September 2022 revealed that the original equipment business grew across the world, including Europe, America, and China.
This growth was also mirrored by Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA)’s trucks and bus segment, and both these segments also posted year to date growth in all major regions of the world except for China. The company also has a fortress balance sheet, with its latest debt sitting at EUR4.5 billion and its operating income at EUR 4.9 billion, indicating that it is more than capable of meeting all of its obligations.
Cathie Wood’s Ark Investment owned 83,484 Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA) shares that were worth $1.8 million by the end of this year’s third quarter.
Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML.PA) is a new arrival in Cathie Wood’s portfolio, unlike Tesla Inc (NASDAQ:TSLA), NVIDIA Corporation (NASDAQ:NVDA) and Zoom Video Communications Inc (NASDAQ:ZM) which have been featuring in ARK’s portfolio for several quarters.
6. HUB Security (TLV:HUB.TA)
Ark Investment’s Stake Value: $2.1 million
Percentage of Ark Investment’s 13F Portfolio: 0.01%
Number of Hedge Fund Holders: N/A
HUB Security (TLV:HUB.TA) is an Israeli startup that is headquartered in Tel Aviv-Yafo. The company develops a hardware security product for finance and cloud applications. It sells its products to enterprises and was set up in 2017.
HUB Security (TLV:HUB.TA)’s founders have a background in the Israeli military, and they have served with the intelligence units of the Israeli Defense Forces. Its products aim to prevent hardware based security intrusions and data thefts, and the company has customers in more than 30 countries. It is also operating in the highly lucrative confidential computing market, which has a total addressable market (TAM) of $54 billion and focuses on solutions that encrypt data even as its being processed inside a processor or a graphics processing unit.
Additionally, and more crucially, HUB Security (TLV:HUB.TA)’s products use post-quantum cryptography to provide secure solutions. This involves using built-in quantum random number generation to eliminate the need for key exchange algorithms, which in turn removes another layer of vulnerability to hackers. HUB Security (TLV:HUB.TA) has also received an order from a Swiss company that is worth $18 million and will see the firm sell its confidential computing solutions. It has also won a three year contract with the Israeli Department of Defense worth NIS 4.2 million.
HUB Security (TLV:HUB.TA) aims to list its shares on the NASDAQ exchange in a $1.3 billion listing under the ticker HUBC, and the firm has filed documents with the Securities and Exchange Commission (SEC) for this purpose. The firm has also received the crucial FIPS 140-2 Level 3 security certification in the U.S. Following its listing, 81% of the company will continue to be owned by existing shareholders, and its chief executive officer Mr. Eyal Moshe will own 7% of the shares.
HUB Security (TLV:HUB.TA)’s first half of 2022 fiscal results saw the firm bring in $36 million in revenue, and it aims to generate $115 million in revenue by the end of this year. It also aims to achieve profitability this year, despite posting a loss during the first half. HUB Security (TLV:HUB.TA) has also closed two pipe funding rounds worth NIS 64 million this year.
Unlike Tesla Inc (NASDAQ:TSLA), NVIDIA Corporation (NASDAQ:NVDA) and Zoom Video Communications Inc (NASDAQ:ZM), HUB is a relatively unknown name in Cathie Wood’s portfolio.
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Disclosure: None. Cathie Wood Stock Portfolio: 7 Newest Stock Picks This Year is originally published on Insider Monkey.