You might know her as the matriarch of Wall Street, a woman who proved that integrity and diligence ultimately wins out over the sometimes sleazy antics that have dominated the culture of high finance. Of course, I’m speaking about Cathie Wood, the founder of ARK Invest and the breath of fresh air that we all need during this tumultuous time.
In a sector full of hyperbolic promises — here’s a tip: the greater the magnitude of the upside call, the likelier there’s no “there” there — Cathie Wood delivers reasonable targets backed by even more reasonable and well-researched theses. If you’re looking for a wild hot take that’s going to go viral for not aging well, you’re probably not going to find it from her.
And that’s exactly what makes her endearing. For instance, the popular ARK Innovation ETF (NYSEARCA:ARKK) has delivered stakeholders over 145% in the trailing year. This includes the recent volatility that has disproportionately hurt the technology sector. Therefore, the beauty of Cathie Wood is that she’s thinking not only about upside potential but mitigating downside risk.
Certainly, this is what has won her legions of fans. But after doing some digging around, I think her personal story is absolutely fascinating. I didn’t know that her now uber-popular brand was named after the Ark of the Covenant. Cathie Wood is a devout Christian and the fact that she’s bringing little bits of her faith into heathen Wall Street is both courageous and just flat-out awesome for the contrarian value.
And her faith has so far yielded big results against even bigger challenges. Cathie Wood founded ARK Invest at age 57 and at a very difficult time in the investment markets. That she was able to persevere against the odds warrants consideration for the stocks that this financial juggernaut is buying.
- Zoom Video Communications (NASDAQ:ZM)
- Teladoc Health (NYSE:TDOC)
- HUYA (NYSE:HUYA)
- Nintendo (OTCMKTS:NTDOY)
- Regeneron Pharmaceuticals (NASDAQ:REGN)
- Twilio (NYSE:TWLO)
- LendingTree (NASDAQ:TREE)
Two notes before we get into these “Cathie Wood stocks.” One, these possible stocks to buy came from the most recent holdings of the ARK Innovation ETF. They represent my opinion — and my opinion alone — about viability in the year ahead.
Second, I personally believe that Jesus can save your soul, but will he save your portfolio? I’m not 100% sure. Remember that Matthew 5:45 states, “For he maketh his sun to rise on the evil and on the good, and sendeth rain on the just and on the unjust.”
So please, no conspiracy theories about these stocks inspired by Cathie Wood, okay? Good. Now let’s get into it.
Stocks on Cathie Wood’s Radar: Zoom Video Communications (ZM)
Currently ranked in ninth place in the ARK Innovation ETF with a weight of 3.06%, Zoom Video Communications was one of the hottest plays in the coronavirus-impacted year of 2020. Even now, over the trailing 365 days, ZM stock is up nearly 197%, a testament to the underlying company’s resilience. But what about moving forward?
This is a much more difficult proposition, one that might indeed require help from a higher power. ZM stock peaked during the second half of October last year, with shares gradually declining as encouraging progress in the Covid-19 vaccine department made headlines.
True, shares did pop up during the final stages of the last surge in Covid-19 cases, as well as during the Texas winter storm. However, this did not spare ZM from succumbing to recent tech volatility.
Still, one thing Cathie Wood may be considering is that it could take longer for the economy and society to recover. According to Deloitte, most Americans won’t be willing to watch a film in the movie theater until around mid-2021. That could give Zoom a longer leash on life.
Teladoc Health (TDOC)
A lot of folks don’t like catching a falling knife. And in my view, Teladoc Health has the signature sign of a falling knife: a buildup that took approximately a month and a half, and breakdown that occurred inside two weeks. If you’re not prepared for some volatility, TDOC stock is not for you.
Obviously, the narrative for Teladoc wasn’t always this negative. Indeed, the telehealth industry was hotly demanded during the pandemic-fueled lockdowns. Let’s face it — being in a medical center isn’t always the most pleasant experience. But during an unprecedented virus outbreak, you didn’t want to be anywhere near a healthcare facility. Fortunately, telehealth platforms stepped up to the plate, boosting the profile of TDOC stock.
With a possible return to normalcy, though, many investors have decided to unwind risk. Unfortunately, this greatly affected Teladoc shares. Still, the good news if you’re bullish is that Cathie Wood likes the stock. It’s ranked in fourth place in the ARKK ETF, with a weight of 5.7%.
The reason? This is a good hedge against an economic and societal recovery that might not pan out as well as our elected officials are hoping for.
Not to be confused with the battle cry of the U.S. Navy and Coast Guard, HUYA refers to a Chinese video live streaming service, focusing primarily on video games. Synergistically, the company provides official broadcasts of esports matchups. Further, HUYA covers other genres that include traditional sporting events.
The case for HUYA stock might go over the head of some investors, depending on their demographic. It’s just hard to wrap your head around the fact that people will pay (much less use their precious time) to watch other people playing video games. Very bizarre indeed. But as Twitch demonstrated, a true, viable economy exists around streamed video game content.
Frankly, HUYA stock also proves how forward-thinking Cathie Wood is. I’m sure she will be the first to admit that video game streaming is not emblematic of a woman of her experience. Nevertheless, she set aside whatever personal biases she may have had and bought shares.
With some experts predicting that esports will generate $1.8 billion in revenue as early as next year, HUYA is one to hold for the long term.
For as long as I can remember, Nintendo has always shied away from controversial content. When it did release content involving violence, the depictions were much more sanitized — you can look at some of the beat-em-up games from the 1980s and 1990s as reference.
But that’s also the reason why NTDOY stock is endearing to many households. As people get older and have children of their own, they start to realize that what was “cool” back in their carefree days is now far less palatable.
Plus, given how much Cathie Wood values her faith, I’m not surprised to see NTDOY stock represented in the ARK Innovation ETF.
However, Nintendo isn’t just a feel-good story. As a family friendly console manufacturer, its products can bring people together. I think that’s important during this time when we’re still in a vulnerable period regarding another potential outbreak of the novel coronavirus.
To be fair, NTDOY isn’t the most popular holding in the ARKK ETF, ranked at No. 22. Still, it has relatively kept up well because of the relevant underlying business.
Regeneron Pharmaceuticals (REGN)
As you know, Regeneron Pharmaceuticals made headlines when its experimental Covid-19 antibody cocktail was used on then President Donald Trump in an effort to restore him to full health following his contraction of the disease. For a brief moment, Americans set aside their rancorous partisanship and wished Trump well.
I think I speak for the vast majority of the country that everyone hoped and prayed for his recovery. Even if you disliked his politics, the reality of the matter is that a president passing on during his or her term creates chaos, an event that we simply didn’t need.
Naturally, REGN stock saw some interest in the headline-driven baptism under fire. And Regeneron made good on its promises. Unfortunately, that wasn’t enough to prevent volatile pressure from hitting shares.
Still, the aggressiveness of the Covid-19 strain in Brazil indicates that the possibility of another resurgence of the coronavirus is not zero. From a cynical perspective, then, REGN stock may have some upside in its future.
Twilio is a favorite among so-called “Cathie Wood stocks” and for good reason. As one of the specialists in communication APIs, Twilio represents a catalyst for our connected economy. In short — and I know I’m butchering the definition — APIs allow two software entities to talk to each other via a predefined call-and-response architecture.
What it really boils down to, though, is that TWLO stock is levered to groundbreaking companies like Uber (NYSE:UBER) and DoorDash (NYSE:DASH). For this write-up, I’m not commenting on these shares’ upside potential. Rather, I’m suggesting that communication APIs allow people to use connectivity technologies and artificial intelligence for practical purposes, such as ordering food or getting a ride to the mechanic’s shop.
Further, Twilio has strong implications in access management with its two-factor authentication or 2FA. With the rise of remote working and even cryptocurrency trading, Cathie Wood made the decision to play this burgeoning sector through TWLO stock.
Granted, shares are treacherous right now because of the tech fallout. But once the market settles down, you may want to consider a long-term position.
Among the stocks to buy that Cathie Wood likes, LendingTree gives me the most headaches. On one hand, it’s very possible that TREE stock could be presenting a compelling discount amid this tech rout. Without question, the underlying business of allowing consumers to shop and compare for their best loan package — including home loans, personal loans and insurance — is pertinent during this time and in the years ahead.
However, many monetary and economic signals clash, presenting confusion to the investor. For instance, rising bond yields have spooked the market, causing a jettisoning of growth stocks. And while Federal Reserve Chairman Jerome Powell stated that the easy money environment will continue, he gave no firm indication that he will do much to address the rising yield.
If yields continue their ascent unabated, it would disincentivize borrowing, especially during this critical hour. That wouldn’t be helpful to TREE stock, to say the least.
Then again, if the economy improves, consumers may justify paying a higher interest rate on the notion that a stable labor market provides confidence and security. We’ll see what happens. But if you do gamble on TREE, make sure to do so with money you can afford to lose.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.