In this article, we discuss the 10 Cathie Wood stocks hedge funds are selling. If you wish to skip our detailed analysis of Wood’s stock picks and the latest market situation, go directly to Hedge Funds are Selling These 5 Cathie Wood Stocks.
The market is experiencing a sell-off owing to the current macro outlook. Inflation touched 8.5% in March, before coming down from near 40-year highs to 8.3% in April. The Fed plans to further hike interest rates in order to slow growth and spending, and is trying its best to craft a ‘soft landing’, a planned slowdown in spending which only leads to a reduction in inflation, and not towards a recession. To paint a larger picture of what the hedge fund industry is currently feeling, consider that the total value of stock holdings in the portfolios of 900+ elite hedge funds tracked by Insider Monkey stood at $2.8 trillion at the end of the first quarter of 2022, down from $3.1 trillion at the end of the fourth quarter of 2021.
At a time when many investors feel holding cash is safer than holding risky stocks, Cathie Wood is defying the larger market sentiment. She continues to hold, and in many cases increase her stakes in, stocks that are considered high-risk/high-reward. The disruptive tech investor has a long-term bullish view on many groundbreaking technologies, such as artificial intelligence, cryptocurrencies, DNA sequencing, electric vehicles, and robotics. In a statement to investors made in February which still carries much significance today, Wood noted that her tech stock picks, badly beaten in the market, were now in “deep value territory”, and that investors would be wise to not turn their “temporary losses” into “permanent losses” by exiting their positions. She emphasized her strategy which focuses on a five-year investment horizon, believing innovative technologies have the power to change lives and transform the world, and make patient investors a lot of money in the process. Along with Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc (NYSE:TDOC), and Roblox Corporation (NYSE:RBLX), Wood’s portfolio contains many exciting stocks, but in this article, we’ll talk about the top 10 Cathie Wood stocks that hedge funds are selling.
Cathie Wood of ARK Investment Management
Our Methodology
We picked the top 10 stocks in Cathie Wood’s Q1 portfolio which registered a minimum decline of 10 hedge fund holders over the previous quarter. Using Insider Monkey’s database of 900+ elite hedge funds, we’ve provided the hedge fund sentiment around each stock to help readers gauge its popularity within the investment world.
Hedge Funds are Selling These 10 Cathie Wood Stocks
10. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Decline in Hedge Fund Holders: 15
ARK Investment Management’s Stake Value: $51.59 million
Percentage of ARK Investment Management’s Portfolio: 0.21%
According to the first quarter database of Insider Monkey, 68 hedge funds were stakeholders in Twitter, Inc. (NYSE:TWTR), with a combined value of $2.07 billion. 15 hedge funds exited their positions in the company over the previous quarter. Cathie Wood also decreased her stake in Twitter, Inc. (NYSE:TWTR) by 93% in the first quarter, coming in at 1.33 million shares valued at $51.6 million.
Jefferies analyst Brent Thill on May 24 maintained a ‘Hold’ rating on Twitter, Inc. (NYSE:TWTR) shares, and lowered the price target to $40 from $48. The analyst was of the view that social media firm Snap’s announcement that its Q2 revenue growth would come in below guidance is “indicative of a rapidly deteriorating macro environment that will likely impact the whole ad industry.” In response, the analyst has lowered his FY22 and FY23 revenue estimates for several digital advertising companies.
Investors were seen selling off their Twitter, Inc. (NYSE:TWTR) shares, owing to the macro uncertainty and the anxiety around the company’s proposed takeover by Elon Musk. 68 hedge funds were long on the company shares at the end of the first quarter, down from 83 hedge funds in the previous quarter. Its largest Q1 shareholder was Elliott Management with 10 million shares worth $386.9 million.
For Q1 2022, Twitter, Inc. (NYSE:TWTR) disclosed an EPS of $0.90, outperforming estimates by $0.87. Quarterly revenue of $1.20 billion fell below analysts’ forecasts by $25 million but grew 15.92% year-on-year.
Investment firm ClearBridge Investments talked about Twitter, Inc. (NYSE:TWTR) in its Q4 2021 investor letter. Here’s what the fund said:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Twitter shares sold off following weaker than expected third-quarter results, but under new leadership, we see the potential for improved execution and performance as live events and entertainment return to pre-pandemic levels.”
In addition to Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc (NYSE:TDOC), and Roblox Corporation (NYSE:RBLX), Twitter, Inc. (NYSE:TWTR) is a prominent stock in the portfolio of Cathie Wood.
9. 1Life Healthcare, Inc. (NASDAQ:ONEM)
Number of Hedge Fund Holders: 20
Decline in Hedge Fund Holders: 11
ARK Investment Management’s Stake Value: $66.51 million
Percentage of ARK Investment Management’s Portfolio: 0.27%
1Life Healthcare, Inc. (NASDAQ:ONEM) provides medical and healthcare services through a membership model. Cathie Wood owned 6 million shares of the company in the first quarter, priced at $66.5 million. This was a 27% increase in holding over the previous quarter, where the ARK boss owned 4.75 million shares of the company.
For the first quarter, 1Life Healthcare, Inc.’s (NASDAQ:ONEM) EPS came in below estimates by $0.02. Revenue stood at $254.1 million, beating consensus estimates by $7.53 million and showing year-on-year growth of 109.5%.
On May 26, Stifel analyst Craig Jones initiated coverage of 1Life Healthcare, Inc. (NASDAQ:ONEM) with a ‘Buy’ rating and a $12 price target. He sees a large total addressable market for the company and an opportunity for disintermediation, given that its business model is differentiated as a fully at-risk primary care provider network; meaning it is both the payor and provider.
Out of all the hedge funds in the database of Insider Monkey, 20 owned positions in 1Life Healthcare, Inc. (NASDAQ:ONEM) at the end of March with an aggregate value of $385.4 million. This shows a loss of 11 hedge funds from the previous quarter, where a total of 31 hedge funds owned stakes in the company. Apart from ARK Investment Management, Tiger Global Management LLC was a leading shareholder of 1Life Healthcare, Inc. (NASDAQ:ONEM) in the first quarter, with a stake worth more than $195 million.
Nomadic Value Partners, an asset management firm, talked about 1Life Healthcare, Inc.’s (NASDAQ:ONEM) in its Q2 2021 investor letter. Here’s what they said:
“On June 7th One Medical (ONEM) announced an acquisition of Iora Health, a Medicare Advantage primary care business (MA PCP), for $2.1 billion of ONEM stock. The price implies a forward EV/sales valuation of 7x, a meaningful discount to comparables, Oak Street Health (OSH, portfolio holding) and Agilon Health (AGL), who had forward EV/sales multiples at time of announcement of 9x and 8.7x, respectively. However, after analyzing the provided information in combination with some additional industry scuttlebutt, I decided to sell our small position in the stock on June 18th. If you regularly read these quarterly letters, you are probably wondering why I would pass on this deal. In short, there are three reasons:
First, Iora Health is not as good of a business as the category leader, Oak Street Health (OSH, current portfolio holding), which causes me to wonder if ONEM is buying a turnaround5. Second, the deal comes with significant integration risks, both tech and cultural, and the synergies presented by management are suspect6. Third, and probably the most important, is lost time as ONEM figures out these two issues over the next 2-3 years. Category leaders are focused on patient acquisition since they have already proven attractive unit economics at some initial scale. ONEM turning inward to plug holes instead of going all-in on patient acquisition could significantly stunt the base on which revenues can compound over the next few years.”
8. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Number of Hedge Fund Holders: 49
Decline in Hedge Fund Holders: 12
ARK Investment Management’s Stake Value: $110.07 million
Percentage of ARK Investment Management’s Portfolio: 0.45%
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a biotech firm which develops and manufactures therapies for the treatment of cystic fibrosis. It posted $3.52 in earnings per share for the first quarter, missing consensus estimates by $0.02. The company generated revenue of $2.1 billion for the quarter, exceeding analysts’ forecasts by $23.74 million and recording year-on-year growth of 21.64%.
On May 23, SVB Leerink analyst David Risinger initiated coverage of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) with a ‘Market Perform’ rating and a $265 price target. He forecasts revenue growth at 4% compound annual growth rate (CAGR) and 5% CAGR EPS growth over the next five years. The analyst notes strong cash flow generation potential given the growth prospects of the Trikafta drug and its limited competitive threat, but holds that the company needs to validate its internal pipeline and pursue mergers and acquisitions in order to diversify.
49 hedge funds were bullish on Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) shares at the close of the first quarter with aggregate positions worth $2.29 billion. This shows a negative trend from the preceding quarter where 61 hedge funds owned stakes in the company. Jim Simons’ Renaissance Technologies held a stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) during the first quarter worth nearly $446 million, making it the biotech firm’s largest shareholder.
Investment firm Tweedy, Browne Company LLC mentioned many stocks in its Q4 2021 investor letter, and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) was one of them. It said:
“Portfolio activity during the quarter was relatively modest, and mostly on the sell side, taking advantage of the market’s advance to trim or sell positions that were trading at or above our estimates of their underlying intrinsic values. In terms of newly established positions, there were only two, (including) Vertex Pharmaceutical, a US-based pharma company specializing in therapies for cystic fibrosis (Value Fund). Both of these companies at purchase were trading at substantial discounts from our estimates of their underlying intrinsic values, and, in our view, are financially strong and well positioned for future growth.
Vertex Pharmaceutical, which was purchased by the Tweedy, Browne Value Fund in mid-November 2021, is a biotechnology company that specializes in rare diseases/orphan drugs. The company’s current strength is in the treatment of cystic fibrosis, where its therapies are the gold standard of care globally. Analysts expect that Vertex will be able to maintain its dominant position in the treatment of this disease, which afflicts 83,000 people worldwide, largely due to the effectiveness of its therapies, the fact that patent expirations for its drugs are a long way off into the future (2030-2037), and the lack of effective competition. This affords Vertex pricing power for its drugs, as there are currently no good alternative therapies. Assuming the company receives complete international and pediatric approvals, Vertex’s portfolio of approved drugs would be eligible to treat 90% of the people who have this disease. Vertex’s therapies are also not one and done drugs, but rather start in early childhood and continue throughout the patient’s lifetime. The company’s strong cash flow, in our view, should support the company’s development of even better next generation drugs to treat cystic fibrosis as well as diversify its drug pipeline to treat other rare diseases. However, many of these treatments are on the horizon or are in their incipient stages of development.
In the quarter just prior to the Fund’s initial purchase of Vertex, knowledgeable insiders, including the company’s CEO and its lead independent director, purchased millions of dollars of the company’s stock at prices higher than we paid for the Fund’s shares. The company itself also repurchased approximately $642 million worth of its shares in the 3rd quarter at or around the same prices paid by the CEO and lead director ($195 per share). We estimate the company’s underlying intrinsic value to be in the range of $240 to $250 per share, and we believe that estimate is well supported by current, here-and-now cash flow, operating income and earnings per share. Morningstar and Goldman Sachs have valued the company at substantially higher prices than our estimate of $240 – $250 per share. The Fund’s weighted average cost in the stock is $187. At initial purchase, the company was trading at approximately 14 times current earnings, and 9.9 times enterprise value to earnings before interest and taxes.”
7. Mercadolibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 63
Decline in Hedge Fund Holders: 11
ARK Investment Management’s Stake Value: $113.01 million
Percentage of ARK Investment Management’s Portfolio: 0.47%
Mercadolibre, Inc. (NASDAQ:MELI) is headquartered in Uruguay and provides online commerce and digital financial services across South America. The firm experienced a decline in its popularity among elite hedge funds at the end of the first quarter, where 63 reported long bets on the company shares as opposed to 74 hedge funds a quarter earlier. Former US Vice President Al Gore’s Generation Investment Management stood as the largest shareholder of Mercadolibre, Inc. (NASDAQ:MELI) in the first quarter, with a $525 million stake which represented a 110% increase in holding over the previous quarter.
On April 12, Citi analyst Joao Pedro Soares lowered the firm’s price target on Mercadolibre, Inc. (NASDAQ:MELI) to $1,500 from $1,750 and maintained a ‘Buy’ rating on the company shares. The analyst forecasts higher consolidated net sales due to appreciation of local currencies, especially in Brazil, but sees lower margins for the company owing to higher operating expenditure.
For Q1 2022, Mercadolibre, Inc. (NASDAQ:MELI) posted earnings per share of $1.30 for the first quarter, falling below estimates by $0.23. The company raked in $2.25 billion in revenue for the quarter, representing an increase of 63.1% from the year-ago quarter and beating market estimates by $210.43 million.
Here is what ClearBridge Investments had to say about MercadoLibre, Inc. (NASDAQ:MELI) in its Q1 2022 investor letter:
“Most of our selling over the last several quarters has occurred among emerging growth companies, where we have reduced our exposure to under 5% to better manage risk. Latin America e-commerce platform MercadoLibre (NASDAQ:MELI) has also experienced an unwind of COVID-19-induced demand while high inflation and high interest rates in Brazil create new headwinds for consumer purchasing power, which will likely mean slower sales of high-ticket items on the company’s platform and led to the sale of the position.”
6. Roblox Corporation (NYSE:RBLX)
Number of Hedge Fund Holders: 40
Decline in Hedge Fund Holders: 21
ARK Investment Management’s Stake Value: $281.72 million
Percentage of ARK Investment Management’s Portfolio: 1.17%
Roblox Corporation (NYSE:RBLX) operates an online platform where users can create and explore intricate 3D worlds, and is known as a prominent ‘Metaverse’ stock. It is down 66.12% so far in the year as of June 2. Yet, it features among the beaten-down stocks that Cathie Wood recently doubled down on. The ARK investor increased her stake in Roblox Corporation (NYSE:RBLX) by 202% in the first quarter of 2022, coming in at 6.09 million shares worth $281.7 million. This is up from the 2.02 million shares held by Wood a quarter ago.
On May 24, Atlantic Equities analyst Kunaal Malde downgraded Roblox Corporation (NYSE:RBLX) to ‘Neutral’ from ‘Overweight’, and slashed the price target to $30 from $60. The firm is taking the correct approach towards monetization, according to the analyst, who sees weakening app download trends suggest that engagement could continue to soften in core markets in the near-term. The analyst also notes that the stock’s valuation looks less attractive than peers on a relative basis.
Roblox Corporation (NYSE:RBLX) reported earnings per share for the first quarter which fell below estimates by $0.07. The company generated a revenue of $631.21 million over the quarter, underperforming analysts’ forecasts by $15.01 million.
Hedge funds were seen exiting their positions in Roblox Corporation (NYSE:RBLX) at the end of the first quarter, where 40 reported ownership of positions in the company, as compared to 61 hedge funds in the preceding quarter.
Tao Value, an investment management firm, discussed the performance of Roblox Corporation (NYSE:RBLX) in its Q4 2021 investor letter. Here’s what the fund said:
“Roblox (RBLX) got significant more attention from both institutional & retail investors after Facebook announced to rename itself as Meta Platforms. I believe the price appreciation is largely attributed to the increased attention. On business side, Roblox rolled out a few successful music events and also partnered with Netflix on testing long-form media consumption in virtual world. Apple in its iOS 14.5 rolled out an impactful change for digital advertising landscape by requiring all apps to ask users to “opt in”.
Along with Tesla, Inc. (NASDAQ:TSLA), Teladoc Health, Inc (NYSE:TDOC), and Roblox Corporation (NYSE:RBLX), investors like Cathie Wood are buying Roblox Corporation (NYSE:RBLX) shares.
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