Cathie Wood’s Fund Starts to Rebound: 5 Stocks to Watch

3. Block, Inc. (NYSE:SQ) 

Number of Hedge Fund Holders: 84    

Gain in Share Price Over Past Month as of July 14: 6.38%

Block, Inc. (NYSE:SQ) provides payment services. Regulatory filings reveal that ARK owned over 9 million shares of Block, Inc. (NYSE:SQ) at the end of March 2022 worth $799 million, representing 4.72% of its 13F portfolio’s weighting. On July 13, the firm announced that it was partnering with prestigious beauty omni-retailer Sephora in a deal that would give customers of the latter the choice to pay for products through four installments. Sephora customers can use the Afterpay services of Block to buy products under the deal. 

On July 11, Keefe Bruyette analyst Sanjay Sakhrani maintained an ‘Outperform’ rating on Block, Inc. (NYSE:SQ) stock and lowered the price target to $100 from $150, noting that lowering market multiples and macro uncertainty were reducing targets across the board. 

At the end of the first quarter of 2022, 84 hedge funds held stakes worth $6.1 billion in Block, Inc. (NYSE:SQ), compared to 96 funds with $5.9 billion in stakes a quarter earlier. 

In its Q1 2022 investor letter, Farrer Wealth Advisors, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:

“Block, Inc. (NYSE:SQ) (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, Inc. (NYSE:SQ), 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.”