In this article, we discuss Cathie Wood’s thoughts on the automobile industry and her top 10 car stock picks.
Cathie Wood oversees the $42 billion portfolio of ARK Investment Management. Wood formed ARK Investment Management in 2014, focusing on purchasing assets in innovative sectors such as genomics, self-driving cars, artificial intelligence, and blockchain technology. Cathie Wood began her career as an assistant economist at Capital Research in 1977. The star fund manager has worked in the financial industry for nearly four decades. Wood joined Alliance Bernstein in 2001 as chief investment officer, managing $5 billion in assets.
Cathie Wood’s exchange-traded funds and stock picks gained popularity among investors in 2020 when her flagship ARK Innovation ETF (NYSE:ARKK) returned more than 150%. However, ARK’s flagship fund dropped 21% last year. As of Q3 2021, Tesla, Inc. (NASDAQ:TSLA) is Wood’s biggest holding representing 7.36% of ARK Investment Management’s holdings followed by Teladoc Health, Inc. (NYSE:TDOC) and Coinbase Global, Inc. (NASDAQ:COIN).
Cathie Wood’s Thoughts on Automobile Industry
In a January webcast for investors, ARK Investment Management CEO Cathie Wood discussed the auto industry and shared data indicating that the bubble in used cars might burst soon. One of the data points shared by the hedge fund manager during the webcast was the price drop in used cars after a year-over-year peak increase of 60% last year. Wood stated that the price of used cars began to fall 1.2% month to month, with an annualized price drop of approximately 12%. Cathie Wood believes that the price of used cars will continue to fall due to an inventory buildup. According to Wood, year-over-year used car sales are down 4%.
In the new car space, new auto sales in the US decreased in the previous months from their peak in April 2021 at 18.25 million units. Although the semiconductor chip shortage was starting to alleviate in October, Wood shared data of decreased new auto sales of approximately 13 million at the time. In November, only 12.86 million new cars were sold, and in December, new car sales fell further to 12.44 million units. Meanwhile, electric vehicles were up nearly 100% at an annual rate.
Wood explained that the drop in new vehicle sales could be attributed to the combination of a decrease in consumer sentiment and a shift in consumer preference toward electric vehicles. In relation to this, the top stock picker tweeted that China is a leading indicator of a shift in consumer preference for EVs. According to ARK Invest data, gas-powered car sales in 2021 in China were down about 4%, while battery electric vehicle sales were up about 145% compared to a year ago.
Tesla, Inc. and other electric-forward automakers, according to Wood, are a better investment than traditional automakers such as Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), which have recently joined the EV bandwagon. Wood anticipates that these traditional automakers could suffer a surprise loss next year due to the decreasing demand for gas-powered vehicles and the greater spending to transition to EVs.
Our Methodology
We chose companies in ARK Investment Management’s Q3 2021 portfolio that work in the automobile sector, from building electric vehicles to developing autonomous technology to producing materials and semiconductor chips.
The sentiment of hedge funds toward each stock was measured using data from 867 hedge funds tracked by Insider Monkey as of Q3 2021.
Cathie Wood of ARK Investment Management
Cathie Wood’s Thoughts on Automobile Industry and Her Top Car Stock Picks
10. Innoviz Technologies Ltd. (NASDAQ:INVZ)
Percentage of ARK Investment Management’s 13F Portfolio: 0%
ARK Investment Management’s Stake Value: $2,032,000
Number of Hedge Fund Holders: 13
Innoviz Technologies Ltd. (NASDAQ:INVZ) manufactures LiDAR sensors, a remote sensing technology used in autonomous vehicles. The Israel-based firm provides a range of LiDAR technologies that are used in both established and emerging industries such as trucking, robotaxis, consumer vehicles, delivery vehicles, and industrial drones.
In November 2021, Innoviz Technologies Ltd. reported revenue of $2.1 million in its third-quarter earnings result, up 106% from the previous quarter and up 13% from a year ago. During the same period, Innoviz Technologies Ltd. had 56 potential clients, with 9 of them in the final stages of commercial discussions.
Auto technology provider Innoviz Technologies Ltd. is among the stocks in Cathie Wood’s portfolio in Q3 2021 along with Tesla, Inc., Teladoc Health, Inc., and Coinbase Global, Inc.. Cathie Wood initiated her position in the LiDAR sensor manufacturer Innoviz Technologies Ltd. in the third quarter of 2021, buying 352,816 shares of the stock worth $2.03 million.
Wood isn’t the only one who believes Innoviz Technologies Ltd. is a good investment. Goldman Sachs analyst Mark Delaney upgraded Innoviz Technologies Ltd. to Buy from Neutral in November. Delaney also raised his price target for the stock to $9 from $7, citing that the total addressable market for lidar hardware could exceed $5 billion by 2025 and reach $15 billion or higher by 2030.
9. Tower Semiconductor Ltd. (NASDAQ:TSEM)
Percentage of ARK Investment Management’s 13F Portfolio: 0%
ARK Investment Management’s Stake Value: $3,994,000
Number of Hedge Fund Holders: 16
Tower Semiconductor Ltd. (NASDAQ:TSEM) is an Israeli semiconductor manufacturer that plays an integral part in the automotive supply chain market. Tower Semiconductor Ltd. offers foundry technology platforms such as image sensors, power management, and wireless communications.
The company grew its revenue in Q3 2021 by 25% year-over-year to $387 million. Tower Semiconductor Ltd.’s (NASDAQ:TSEM) automotive segment accounted for 12% of the company’s total revenue in the quarter. Investment banking group Jefferies increased its price target for Tower Semiconductor Ltd. to $46 from $42 and maintained a Buy rating on the stock in December.
Cathie Wood cut her stake in Tower Semiconductor Ltd. by 29%, but the star stock picker still owns 133,576 shares of the stock as of the end of September 2021. In Q3 2021, 16 hedge funds in Insider Monkey’s database hold $355 million in Tower Semiconductor Ltd..
8. Arconic Corporation (NYSE:ARNC)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,305,000
Number of Hedge Fund Holders: 26
Among the stocks Cathie Wood holds in her $42 billion disruptive innovation portfolio together with Tesla, Inc., Teladoc Health, Inc., and Coinbase Global, Inc. is aluminum producer Arconic Corporation (NYSE:ARNC). Cathie Wood owns 168,202 shares of Arconic Corporation worth $5.3 million, according to Q3 13F filings, representing 0.01% of her total investments for the third quarter of 2021. The Pennsylvania-based company offers aluminum materials used in manufacturing automobiles and commercial trucks.
The adjusted EBITDA of Arconic Corporation in Q3 2021 was $171 million, down 9% sequentially due to continued weakness in auto manufacturing due to semiconductor supply issues, but up 4% year over year. The company’s total sales in Q3 grew 34% year over year to $1.9 billion.
As the automobile market recovers, analysts are seeing a tailwind for the aluminum sheet producer. In December, JPMorgan analyst Michael Glick upgraded his rating on Arconic Corporation to Overweight from Neutral. Glick also increased his price target for the stock to $40 from $35.
Hedge funds see Arconic Corporation as a potential beneficiary of the ongoing improvements in the automotive supply chain. Multinational investment firm Orbis Investment Management is a leading shareholder in Arconic Corporation with over 10 million shares worth more than $318 million.
7. Kaiser Aluminum Corporation (NASDAQ:KALU)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,275,000
Number of Hedge Fund Holders: 10
Kaiser Aluminum Corporation (NASDAQ:KALU) is a California-based light aluminum producer that has been serving the automotive extrusion market for over twenty years. Some of the semi-fabricated aluminum products the company offers are driveshaft tubes, bumper extrusion, crush cans, and apron tubes.
Kaiser Aluminum Corporation delivered 20 million pounds of automotive extrusions in the third quarter of 2021, down from 24 million pounds in Q2 2021 due to a semiconductor shortage. However, as the semiconductor chip shortage subsides, Kaiser Aluminum Corporation expects its automotive sector to grow at a CAGR of 5% over the next ten years, bolstered by growth in the electric vehicle sector.
Between June and September, Cathie Wood’s ARK Investment Management increased its stake in Kaiser Aluminum Corporation by 12% bringing the fund’s total holdings to 48,413 shares worth $5.3 million.
6. AMETEK, Inc. (NYSE:AME)
Percentage of ARK Investment Management’s 13F Portfolio: 0.01%
ARK Investment Management’s Stake Value: $5,544,000
Number of Hedge Fund Holders: 38
Among the top auto stocks in Cathie Wood’s portfolio is AMETEK, Inc. (NYSE:AME), a global manufacturer of electromechanical products used in building heavy trucks and OEM car parts. Cathie Wood reduced her stake in AMETEK, Inc. by 17% in Q3 2021, and the auto stock now accounts for 0.01% of ARK Invest’s total holdings.
AMETEK, Inc. saw a 17% increase in organic sales and a 28% increase in revenue to $.144 billion in the third quarter of 2021. AMETEK, Inc. acquired Alphasense, a manufacturer of gas and particle sensors, in December to expand its electronic instruments sector.
Mizuho analyst Brett Linzey initiated a Buy rating on AMETEK, Inc. on December 16. Linzey set a $159 price target for the stock. Meanwhile, Insider Monkey’s data shows that 38 elite hedge funds held stakes in the company at the end of the September quarter.
In addition to Tesla, Inc., Teladoc Health, Inc., and Coinbase Global, Inc., AMETEK, Inc. is among the stocks Cathie Wood was keeping in her portfolio in Q3 2021.
5. Xometry, Inc. (NASDAQ:XMTR)
Percentage of ARK Investment Management’s 13F Portfolio: 0.03%
ARK Investment Management’s Stake Value: $13,895,000
Number of Hedge Fund Holders: 18
Xometry, Inc. (NASDAQ:XMTR) is among the newest car stocks in Cathie Wood’s portfolio. In Q3 2021, Wood initiated her position in Xometry, Inc. and bought 240,947 shares of the stock for a total value of nearly $14 million.
The company manufactures on-demand automotive parts for some of the biggest car companies in the world like BMW. As an on-demand industrial parts marketplace, Xometry, Inc. also serves a variety of industries including robotics, aerospace, consumer goods, and electronics.
In its third-quarter financial release, Xometry, Inc. stated that active buyers in the marketplace increased by 61% to 26,187, up from 16,266 a year ago. Xometry, Inc. stock rise about 11% in December. To grow its business, the industrial marketplace acquired digital marketing solutions vendor Thomas for $300 million at the time.
There were 18 hedge funds in Insider Monkey’s database that held stakes in the company at the end of the third quarter, compared to 28 funds in the previous quarter.
4. Baidu, Inc. (NASDAQ:BIDU)
Percentage of ARK Investment Management’s 13F Portfolio: 0.08%
ARK Investment Management’s Stake Value: $36,117,000
Number of Hedge Fund Holders: 44
Following its comeback from a year-long collapse, market analysts are becoming more upbeat on Baidu, Inc. (NASDAQ:BIDU), a Chinese internet search engine giant. On January 12, UBS analyst Wei Xiong increased his price target on Baidu, Inc. while maintaining a Buy rating on the stock. Xiong claims that the company is making significant progress on its auto and cloud programs, which are in line with the government’s innovation plans.
Baidu, Inc. CEO Robin Li recently announced that Jidu Auto, a joint venture with Zhejiang Geely Holding Group, will launch mass production of its first electric vehicle with Level-2 autonomous driving capabilities in 2023.
At the end of the third quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $2 billion in Baidu, Inc., compared to 59 the preceding quarter worth $3.47 billion.
In its Q3 2021 investor letter, Ariel Investments mentioned Baidu, Inc. and discussed its stance on the firm. Here is what the fund said:
“When we have such a high level of conviction for a company it is not uncommon for us to own it in size across our portfolios. Such is the case with technology giant Baidu, whose leading search engine has been dubbed the “Google of China.” This quarter shares sold off in sympathy with the Chinese internet sector as investors were rattled by the government’s sweeping regulatory crackdown intended to promote “common prosperity” by easing wealth inequality. While we recognize the greater political risk of investing in emerging markets such as China and incorporate an appropriately higher risk premium in the discount rate in our valuation models, we believe Baidu’s business strategy is aligned with national policies and priorities and is therefore not adversely impacted unlike some other players in the internet sector who are in the eye of the storm.
Indeed, the Chinese government recognizes Baidu’s large, upfront investments in many next-generation artificial intelligence (AI) technologies and hails it as a national champion. For example, the company’s Advanced Driving Support System (ADAS), Apollo, has twice as much data on miles driven than any other initiative in the world, giving Baidu (and China) a large lead in the global AI arms race. In addition, Baidu’s cloud offering touts highly differentiated Platform as a Service (PaaS) features and capabilities for a demanding enterprise customer base. While these initiatives are a temporary drag on margins and require long-term execution, their success will bolster China’s “dual circulation” strategy aimed at spurring domestic demand, innovation, and self-reliance.” (Click here to see the full text)
3. Teradyne, Inc. (NYSE:TER)
Percentage of ARK Investment Management’s 13F Portfolio: 0.14%
ARK Investment Management’s Stake Value: $61,335,000
Number of Hedge Fund Holders: 42
Teradyne, Inc. (NYSE:TER) assists automakers in delivering cost-effective and high-quality automotive devices by providing automation test services. Teradyne, Inc. verifies that automakers and suppliers use high-quality semiconductors, increase car safety features, and meet rigorous CO2 standards.
Cathie Wood has held Teradyne, Inc. stock since the fourth quarter of 2017 and now owns 561,829 shares worth approximately $61 million as of the end of the third quarter of 2021. New York-based investment advisory firm Alkeon Capital Management is the largest shareholder of Teradyne, Inc. with 3.97 million shares worth $434 million.
Wood isn’t the only one who believes in Teradyne, Inc., as Loop Capital analyst Scott Graham initiated a Buy rating on the stock on January 13 with a $202 price target.
2. TuSimple Holdings Inc. (NASDAQ:TSP)
Percentage of ARK Investment Management’s 13F Portfolio: 0.91%
ARK Investment Management’s Stake Value: $382,967,000
Number of Hedge Fund Holders: 12
TuSimple Holdings Inc. (NASDAQ:TSP) develops autonomous technology for commercial semi-trucks. The company’s driverless trucks operate completely autonomously without human intervention. As the California-based trucking company went public last year, TuSimple Holdings Inc. gained partnerships with various logistics companies including United Parcel Service, Inc. (NYSE:UPS), Ryder System, Inc. (NYSE:R), and DHL.
TuSimple Holdings Inc. increased its revenue by approximately three times from the previous year in the third quarter of 2021 to $1.8 million, owing to increased utilization of its own commercial and partner fleet.
Cathie Wood increased her stake in TuSimple Holdings Inc. by 60% during the third quarter of 2021, bringing her total holdings to over 10 million shares worth $383 million. Overall, 12 funds of the 867 elite funds tracked by Insider Monkey reported owning stakes in TuSimple Holdings Inc. at the end of September 2021.
1. Tesla, Inc. (NASDAQ:TSLA)
Percentage of ARK Investment Management’s 13F Portfolio: 7.36%
ARK Investment Management’s Stake Value: $3,064,923,000
Number of Hedge Fund Holders: 60
Tesla, Inc. has the highest weightage in Cathie Wood’s portfolio as of the end of Q3 2021, accounting for 7.36% of ARK Investment Management’s total holdings. ARK Invest sold 87,756 shares of the EV stock for $90.5 million on January 14, extending its months-long profit booking spree. Known as a Tesla, Inc. bull, Cathie Wood stated in September that she would sell the electric-vehicle maker’s stock if it reaches her five-year target of $3,000 by the end of 2022.
Tesla, Inc. has the most productive auto factory in North America, which generated an average of 8,550 cars per week in its California plant last year, according to Bloomberg data. As a result, more investors expressed optimistic views on Tesla, Inc.. In January, Jefferies maintained its Buy rating on the EV stock while Piper Sandler kept its Overweight rating on the auto stock.
At the end of the third quarter of 2021, 60 hedge funds in Insider Monkey’s database held stakes in Tesla, Inc. worth $10.6 billion, the same as the previous quarter with a stake of $9.3 billion.
In its Q4 2021 investor letter, investment management firm East 72 mentioned Tesla, Inc. and discussed its stance on the firm. Here is what the fund said:
“However, our favourite short play of 2021, which added value in the past quarter (falling over 14%) was in the US ETF, ARK Innovation Fund (ARKK). ARKK is managed by ARK Investment Management (ARKIM) founded in 2014 by Cathie Wood, its (now) 66year old devout Christian portfolio manager. ARKIM focuses on investing in what it believes are the beneficiaries of disruption and innovation with a focus on AI, DNA sequencing, robotics, energy storage, and blockchain technology3. ARKIM’s viewpoints are interesting but in my opinion, potentially have a habit of falling foul of Bill Gates’ famous comment that “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. Moreover, this opinion is buttressed by ARKIM’s publication of various financial models to provide a backdrop for their extravagant Tesla valuations, which lack any kind of accounting credibility….ARKK’s biggest investment over this period has been Tesla, averaging around 10% of the fund. ARKK has been forced to sell Tesla shares, despite having a price target of US$3,000/share, mainly because TSLA has appreciated by around 40% since the fund peak in mid-February 2021; the residual 90% of the portfolio is cumulatively down around 44% since 18 February 2021 (see some examples on attaching table). Whatever our view of TSLA, it has been a shining beacon in a sea of detritus for ARKK.”
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This article is originally published at Insider Monkey.
