10 Stocks to Buy From Cathie Wood’s Fleet of ETFs 


stocks to buy - 10 Stocks to Buy From Cathie Wood’s Fleet of ETFs 

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If you’re looking for stocks to buy and can’t stand the 15 minutes of fame portfolio manager Cathie Wood’s gotten for her investment management company, Ark Investment Management, you might want to buy the Short ARKK ETF when it becomes available. 

The anti-ARKK ETF will trade under the symbol SARK and be actively managed by Tuttle Capital Management CEO Matt Tuttle. It will provide the inverse daily return of Wood’s biggest and best-known fund, ARK Innovation ETF (NYSEARCA:ARKK).

You know the ETF world has run out of ideas when funds are launching that bet against specific portfolio managers. It’s just nuts. We’ll see if it gains traction. 

In the meantime, I remain a fan of Wood. Her focus on disruptive innovation is an original idea in an investment industry with very few original thinkers.

  • Zillow Group (NASDAQ:Z
  • Tesla (NASDAQ:TSLA
  • MercadoLibre (NASDAQ:MELI
  • Exact Sciences (NASDAQ:EXAS
  • Teladoc Health (NYSE:TDOC
  • Twilio (NYSE:TWLO
  • Shopify (NYSE:SHOP)  
  • Square (NYSE:SQ
  • Trimble (NASDAQ:TRMB

As always, my 10 selections of stocks to buy will be as diversified as possible – by both sector/industry, ARK ETFs, and market capitalization – to provide you with an excellent innovative version of the coffee-can portfolio

Stocks to Buy: Roku (ROKU)

Roku Stock Is Entering the Buy Zone for Longterm Investors 
Source: Eric Broder Van Dyke / Shutterstock.com

Sector: Communication Services

Shares Held in ARK Invest Top 10: 2.97 million

Roku, the first on this list of stocks to buy, is the third-largest holding of ARKK, Wood’s largest fund, accounting for 4.9% of the ETFs total net assets. 

I’ve been a Roku believer since December 2017, when I suggested that ROKU would keep going higher despite a high valuation. It’s up 829% in the 3.5 years since. 

Over the past four quarters, Roku’s big three metrics – active accounts, streaming hours, and ARPU (average revenue per user) – have all increased on a sequential basis in every quarter. 

While a dip in one or more of three metrics could result in a big selloff like the one we’ve seen from Pinterest (NYSE:PINS), I would use that as a huge buying opportunity. 

Zillow Group (Z) 

zillow app icon on a mobile phone
Source: OpturaDesign / Shutterstock.com

Sector: Communication Services 

Shares Held in ARK Invest Top 10: 1.69 million

Zillow Group is the third-largest holding of ARK Fintech Innovation ETF (NYSEARCA:ARKF), which is Wood’s ETF focused on companies involved in fintech innovation, whether as a supplier of technology or as a user. I would say the real estate marketplace is a little of both. Zillow accounts for 4.4% of the ETF’s $4.0 billion in total net assets. 

The media like to point out that Zillow is one of those stocks when discussing Wood’s poor performance in 2021. However, Zillow itself is down 19.4% year-to-date through Aug. 3, while the U.S. markets as a whole are up 17.7%. ARKF is up 3.0%, but well off the performance of the markets. 

In June, InvestorPlace’s Nicolas Chahine, one of our best stock prognosticators, called Zillow a “cheap stock,” suggesting that meme trading sent its share price up to unsustainable heights over $200 in February and was due for a cooldown.   

Now trading about $7 below where it was trading in mid-June when Chahine made his comments, I think it’s fair to say nothing has changed in the housing market that should scare you away from Zillow stock. 

In the first quarter ended March 31, its homes segment saw a re-acceleration in the number of homes it bought (1,856) and sold (1,965). That should bode well for future quarters. 

Stocks to Buy: Tesla (TSLA)

Tesla Super Charging station on Stockdale Hwy and the 5 fwy. Tesla Supercharger stations allow Tesla cars to be fast-charged at the network within an hour.
Source: Sheila Fitzgerald / Shutterstock.com

Sector: Consumer Discretionary

Shares Held in ARK Invest Top 10: 4.85 million

The electric vehicle manufacturer’s stock is held by three of Wood’s six actively managed ETFs. A majority of the shares are held within ARKK. TSLA is ARKK’s largest holding, accounting for 9.7% of the fund’s total net assets. 

Tesla is the name that put Wood on the map in February 2018 when she boldly predicted that Elon Musk’s pride and joy would hit $4,000.

“If we’re right, this stock in our models is going to $4,000,” Wood said on Squawk Box at the time. “If we’re wrong, and all they do is electric, our bear case is $600.”

It actually hit $4,000 on a pre-split basis in January of this year – Tesla split on a 5-for-1 basis on Aug. 30, 2020 – three years after her big call. It’s since lost almost $200 of its value but in recent weeks appears to have bottomed. 

Tesla reported strong earnings on July 26 that included $12 billion in Q2 2021 revenue, $600 million ahead of the consensus, and earnings per share of $1.45, 51 cents higher than analyst expectations. In addition, its gross margins were 25.8%, 270 basis points higher than the analyst estimate. 

With its China Gigafactory pushing out lots of vehicles and Austin and Berlin factories coming online in 2022, it’s not a surprise Tesla expects to grow revenue and units delivered by 50% over the next few years. 

Were Cathie Wood to get out of Tesla, then I’d expect the bottom to fall out. Until then, it’s an excellent choice among these stocks to buy. 

MercadoLibre (MELI) 

MercadoLibre (MELI) homepage on a smartphone
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Sector: Consumer Discretionary

Shares Held in ARK Invest Top 10: 94,078

The Latin American e-commerce and payments success story is ARKF’s seventh-largest holding with a weighting of 4.08% of the fund’s total net assets.

In July, MercadoLibre announced that it was partnering with Bigcommerce Holdings (NASDAQ:BIGC) to provide access to the Texas-based company’s vendors in Latin America. That’s excellent news for its more than 60,000 vendors because Latin America is the fast-growing e-commerce market in the world.  

“We love having lots of partners that service the different needs of merchants,” Russell Klein, BigCommerce’s chief commercial officer, said in an interview. “What we’re doing with MercadoLibre is removing the complexity of selling outside the U.S.”

It’s only a matter of time before MercadoLibre begins to take market share in places like Miami, Texas, and California. In the meantime, it generates 55.2% of its revenue from Brazil while Argentina contributes 24.7% of sales, Mexico another 14.5%, and other countries account for the rest. 

A $1,000 investment in MELI stock a decade ago is worth more than 20-fold today.  

Stocks to Buy: Exact Sciences (EXAS)

an image of a microscope
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Sector: Health Care

Shares Held in ARK Invest Top 10: 4.04 million 

Exact Sciences is the third-largest holding of the ARK Genomic Revolution ETF (NYSEARCA:ARKG), with a weighting of 4.89% of the fund’s $9.74 billion in total net assets. 

I’ll be honest, I don’t know a whole lot about the company, but the fact it provides cancer screening and diagnostic tests to help people proactively take action in their lives suggests it’s doing well by doing good. 

On July 28, it announced second-quarter results that included a 62% increase in revenue to $434.8 million. It anticipates between $1.71 billion and $1.75 billion in sales for all of 2021. 

The company’s screening revenue, including the Cologuard colorectal cancer screening test, will account for approximately 65% of sales. Its precision oncology segment is expected to account for 30% of sales, with Covid-19 testing accounting for the rest.

Of the 21 analysts who cover its stock, 16 rate it a buy, with an average target price of $149.94.  

Teladoc Health (TDOC) 

Teladoc Health (TDOC) logo on a mobile phone screen
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Sector: Health Care

Shares Held in ARK Invest Top 10: 14.78 million

Next among our stocks to buy, this provider of online medical care is held by three different ARK ETFs, including ARKK at a 5.91% weighting.

In January 2020, I argued that shorting Teladoc stock at or near $100 was not a good idea. By February 2021, it had risen to an all-time high of $308. Now trading about half that price, buying today gives you a much better bang for your buck. 

The company reported earnings at the end of July that included a bigger quarterly loss ($134 million or 86 cents) than analysts expected. However, on the top line, sales rose 109% year-over-year to $503 million.

“Overall, it was a positive first half of the year for the leader in the emerging digital care delivery space, and we expect 2021 to be another strong year for the organization,” Barron’s reported William Blair analyst Ryan Daniels wrote in a note to clients. 

During fiscal 2021, Teladoc expects 13.5 million to 14 million visits will generate at least $2 billion in revenue and 52 million to 54 million paid memberships. 

Covid or no-Covid, telemedicine ain’t going away. 

Stocks to Buy: Twilio (TWLO) 

The Twilio (TWLO) logo is displayed over a white background on a smartphone screen.
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Sector: Technology 

Shares Held in ARK Invest Top 10: 3.27 million

Twilio is held by three different ARK ETFs. The largest holding being ARKK at 3.74%, accounting for 69% of its TWLO holdings. 

If volatility is your thing, Twilio is your perfect investment. In 2021, it has hit $400 on four separate occasions – January, February, April and June – only to fall back into the $300s every time.    

But make no mistake. Twilio is a stock to own for the long haul despite the reservations of Lakehouse Capital, which exited its position in the second quarter.

“The Fund held 20 positions as of the end of June and exited four during the year: Atlassian, M3, Okta, and Twilio. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place,” Lakehouse Capital’s 2021 annual letter stated.

The asset manager has a point. Twilio’s five-year average price-to-sales ratio is 16.3x. It currently trades at 26.5x sales.

However, when you’re growing your revenues by 64% a year, paying a premium comes with the territory. It currently has $2.25 billion in trailing 12-month revenue. If it keeps up this growth rate for the foreseeable future, it should get to $10 billion within 36 months. 

Out of 30 analysts covering TWLO, 26 rate it a “buy.” In addition, it has a target price of $476.29, providing 28% upside at current prices. 

Shopify (SHOP) 

Shopify (SHOP) logo on a smartphone which is next to a miniature shopping cart and miniature cardboard boxes
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Sector: Technology

Shares Held in ARK Invest Top 10: 1.02 million

It doesn’t take many shares to build a large position in a stock that’s trading for $1,551 a share. Like a lot of the stocks mentioned in this article, Shopify is held in three different ETFs.

And although its largest position is the 670,877 held by ARKK, it is the 161,348 held by ARKF that stands out. That’s because it’s the second-largest position behind Square with a 6.75% weighting. 

Is there anything that Shopify can’t do?

On July 28, it reported record revenues, busting through $1 billion for the first quarter of its relatively short history. Sales grew by 57% in Q2 2021 to $1.1 billion. Shopify gets a piece of every sale done through its platform. In the second quarter, it had gross merchandise volume of $42.2 billion, 40% higher than Q2 2020.

“In places that have begun to reopen, like the U.K., GMV grew faster than our overall GMV in the quarter year-over-year, indicating that online and in-store commerce are no longer mutually exclusive,” the Ottawa Business Journal reported Shopify president Harley Finkelstein said in its Q2 2021 conference call. 

Equally exciting, it delivered its fifth straight profitable quarter earning an adjusted profit of $284.6 million, more than double its Q2 2020 adjusted profit of $129.4 million.

Not included in the adjusted profit was an unrealized net gain of $778 million on its equity investments. All of that gain was from its investment in Global-E (NASDAQ:GLBE), the cross-border e-commerce solutions company that went public in May. 

Stocks to Buy: Square (SQ)

Square (SQ) logo displayed on a smartphone screen
Source: Shutterstock

Sector: Technology

Shares Held in ARK Invest Top 10: 6.82 million

Square is the number one holding for ARKF at a weighting of 11.77%. It is the sixth-largest holding of ARKW (4.67%) and the fourth-largest of ARKK at 5.07%.

Square’s been making many moves to morph into a complete financial services company that offers everything from payment processing to loans to deposits to investing platforms. It wants to do it all for its global customer base. 

As part of this plan, it announced its largest acquisition on Aug. 1, saying it would pay $29 billion in stock for Afterpay Ltd. (OTCMKTS:AFTPY), an Australian buy-now, pay-later company. It is paying a 31% premium based on the closing price of Afterpay’s stock the day before Square’s announcement. 

Afterpay shareholders will receive 0.375 shares of SQ for every share held in Afterpay. As a result, its shareholders will own approximately 18.5% of Square.  

Afterpay has approximately 16 million users. Square intends to convert those to its Cash App, which has 70 million annual users. 

“The addition of Afterpay to Cash App will strengthen our growing networks of consumers around the world while supporting consumers with flexible, responsible payment options,” said Brian Grassadonia, Lead of Square’s Cash App business. “Afterpay will help deepen and reinforce the connections between our Cash App and Seller ecosystems, and accelerate our ability to offer a rich suite of commerce capabilities to Cash App customers.”

Are the banks worried? They ought to be.

Trimble (TRMB) 

The Trimble (TRMB) headquarters in Sunnyvale, California.
Source: Tada Images / Shutterstock.com

Sector: Technology

Shares Held in ARK Invest Top 10: 2.94 million

Trimble’s location-based solutions include 3D laser scanning, flow and application control systems, monitoring systems, water management and navigation infrastructure. It serves industries in need of precision measurement and navigational guidance. It is both a provider of hardware and software solutions. 

ARK Space Exploration and Innovation ETF (NYSEARCA:ARKX) has TRMB stock as its top holding at a weighting of 9.89%. It is the second-largest holding of ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ) at a weighting of 6.85%. However, the number of shares held by ARKQ is about 3x as many as ARKX. 

The company had record revenue of $887 million in the first quarter, 12% higher than a year earlier. On an annualized basis, it had recurring revenue (ARR) of $1.32 billion, 9% higher than the trailing 12-month ARR.

I’m a free cash flow junkie. Trimble’s TTM FCF through the end of the first quarter is $690 million, up 11% from Q4 2020. Based on a market cap of $21.84 billion, its current FCF yield is a reasonable 3.2%. 

Trimble expects 2021 full-year non-GAAP revenue of at least $3.4 billion and earnings between $2.30 and $2.50 per share. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2021/08/10-stocks-to-buy-from-cathie-woods-fleet-of-etfs/.

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