We recently published a list of Ark Invest Stock Portfolio: Top 10 Stocks to Buy. In this article, we are going to take a look at where Roku, Inc. (NASDAQ:ROKU) stands against other top stocks to buy from Ark Invest’s portfolio.
ARK Investment Management LLC, commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida. Founded by Cathie Wood in 2014, the firm specializes in actively managed exchange-traded funds (ETFs) focused on disruptive innovation. As of Q4 2024, ARK holds over $12 billion in 13F securities, with its top ten positions comprising slightly over 50% of its diversified portfolio, which typically comprises between 35 and 55 holdings. The firm’s investment approach spans various market capitalizations, sectors, and geographies, aiming to identify and invest in companies poised to lead in transformative technological advancements.
Cathie Wood, born Catherine Duddy Wood in 1955, is widely recognized as one of the most influential figures in the investment industry. As the founder, CEO, and chief investment officer of ARK Investment Management, she has carved out a reputation for her innovative and forward-thinking investment strategies. Wood’s approach to investing has consistently focused on identifying and capitalizing on disruptive innovation, setting her apart as a visionary in the financial sector.
After graduating from the Notre Dame Academy Catholic girls’ school, Wood pursued higher education at the University of Southern California (USC), where she earned a summa cum laude degree in finance and economics in 1981. She later completed a Master of Business Administration in finance at USC’s Marshall School of Business. A key influence in her academic journey was economist Arthur Laffer, known for the Laffer Curve, which theorizes the relationship between tax rates and tax revenue. Laffer’s mentorship helped shape Wood’s understanding of economic theory and her investment philosophy.
Wood’s career in finance took off after graduation, with roles at prestigious firms such as Jennison Associates, where she spent 18 years in various leadership roles, and Capital Group, as an assistant economist. At AllianceBernstein, where she managed over $5 billion, she honed her ability to identify long-term growth trends. Despite criticism of her investment decisions during the 2008 financial crisis, Wood remained steadfast in her belief that disruptive innovation would drive the future of economic growth. She later went on to co-found Tupelo Capital Management, a hedge fund focused on global thematic strategies.
In 2014, Cathie Wood founded ARK Invest with the goal of focusing exclusively on disruptive innovation and seizing the investment opportunities it generates. Her pioneering move involved structuring actively managed investment strategies as exchange-traded funds (ETFs), an industry-first approach that allowed a broader range of investors to participate in emerging technologies. She recognized that investing in such transformative technologies requires active management to navigate rapid changes, an open research ecosystem unrestricted by sectors, geographies, or market capitalizations to capture technological convergence, and the sharing of knowledge to deepen understanding of emerging industries. Reflecting these principles, ARK stands for Active Research Knowledge—a philosophy that underpins the firm’s investment approach.
Accordingly, ARK’s investment philosophy is centered around thematic investing in disruptive innovation, leveraging over 40 years of experience in identifying high-growth opportunities. ARK defines disruptive innovation as the introduction of technologically enabled products or services that significantly alter existing industries. The firm’s research process focuses on cross-sector innovations such as artificial intelligence, autonomous vehicles, Fintech, robotics, energy storage, DNA sequencing, 3D printing, and blockchain technology. ARK’s goal is to seek long-term capital appreciation by investing in these cutting-edge industries, believing that companies driving technological advancements will fundamentally reshape industries and offer outsized returns compared to traditional investment strategies.
Our Methodology
The stocks discussed below were picked from Ark Invest’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A large movie theatre filled with people enjoying a film streaming on a smart TV.
Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders as of Q4: 37
Ark Invest’s Equity Stake: $793.35 Million
Roku, Inc. (NASDAQ:ROKU) exceeded expectations in Q4 2024, reporting a 22% revenue increase and a significantly reduced net loss. The company ended the year with 89.8 million streaming households, marking a 12% year-over-year increase and a gain of 4.3 million from the prior quarter. However, Roku announced that it will no longer report household metrics on a quarterly basis, shifting focus toward revenue and profitability. The company posted Q4 revenue of $1.201 billion and a net loss of $35.5 million, or -$0.24 per share, compared to analysts’ expectations of $1.15 billion in revenue and an EPS of -$0.43. Operating expenses saw only a slight increase of 2%, totaling $551.7 million. Roku, Inc. (NASDAQ:ROKU) highlighted its expanding U.S. presence, with its platform now reaching over half of broadband households.
Roku’s Platform business, which includes advertising, content sales, and subscription revenue sharing, contributed $1.04 billion to Q4 revenue. Political ad spending accounted for about 6% of this total, while advertising sales outpaced overall platform revenue growth, surpassing both the broader ad market and the OTT ad sector in the U.S. Roku, Inc. (NASDAQ:ROKU) reported a strong gross margin of 54% for Q4, exceeding its own forecasts due to a favorable shift in revenue mix. For the full year 2024, Roku’s overall gross margin stood at 53.5%. This performance underscores the company’s ability to drive profitability in its core business segments while maintaining steady revenue growth.
Roku, Inc. (NASDAQ:ROKU) anticipates achieving operating income profitability for the full year 2026. For Q1 2025, the company projects total net revenue of $1 billion, a 14% increase year-over-year. Roku expects total gross profit of $450 million, adjusted EBITDA of $55 million, and a net loss of $40 million. For the full year 2025, the company forecasts net revenue of $4.61 billion, total gross profit of $2 billion, and adjusted EBITDA of $350 million. With strong growth projections and a path to profitability, Roku remains one of the top stocks to buy.
Overall, ROKU ranks 2nd on our list of top stocks to buy from Ark Invest’s portfolio. While we acknowledge the potential for ROKU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ROKU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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