- Despite recent declines in share prices, these Cathie Wood stocks are strong plays on innovation, a key driver of the global economy.
- Block (SQ) — The launch of Square Loans in Canada as well as the new generation of the Square Stand could provide a significant path to revenue growth.
- CRISPR Therapeutics (CRSP) — Substantial global investment in genetic engineering is likely to pave the way for tremendous growth.
- Shopify (SHOP) — The recent acquisition of Deliverr is likely to improve logistics operations and increase efficiency.
- ARK Autonomous Technology & Robotics ETF (ARKQ) — The exchange-traded fund, which has lost over a third of its value in 2022, offers better opportunities now.
- ARK Space Exploration & Innovation ETF (ARKX) — The fund invests in firms that are at the forefront of aerospace and space-related technologies.
Cathie Wood stocks, our topic for today, have come under fire in 2022. Yet, during the pandemic, ARK Invest funds, led by Wood’s team, had generated tremendous buzz on Wall Street. The firm’s exchange-traded funds (ETFs), which seek long-term capital growth, focus mainly on disruptive innovation.
However, 2022 has proved a tough year for such high-growth shares. Concerns over the possibility of a recession in the near future have made investors wary of high-risk technology stocks, including those held by ARK funds.
Just last week, Wood told subscribers to her stock commentary that “volatility could persist until demand destruction and excess inventories make it clear that inflation is not entrenched in the economy.”
Additionally, a slate of disappointing earnings results have been a major factor in the recent drop. For instance, since the beginning of the year, the ARK Innovation ETF (NYSEARCA:ARKK) has fallen over 60%.
Yet, innovation remains the primary driving force in the global economy. McKinsey & Co. suggests, “Innovation is critical to growth, particularly as the speed of business cycles continues to increase.”
Despite recent losses, robust companies in Wood’s portfolio could potentially bounce back in the coming months. With that in mind, here are three of the best of Cathie Wood stocks to buy in May.
|CRSP||CRISPR Therapeutics AG||$52.23|
|ARKQ||ARK Autonomous Technology & Robotics ETF||$52.60|
|ARKX||ARK Space Exploration & Innovation ETF||$14.36|
Our first Cathie Wood stock pick is the financial technology (fintech) name Block (NYSE:SQ). Formerly known as Square, Block’s products include the Square payment system, Cash App, Afterpay, Weebly and TIDAL.
In early May, Block published first-quarter results. Total net revenue was $3.96 billion, down from $5.06 billion the year before. This decline of 22% year-over-year (YOY) was mainly due to the inclusion its Bitcoin (BTC-USD) activity. Excluding bitcoin revenue, revenue increased 44% YOY to $2.23 billion. The net loss per diluted share came in at 38 cents, compared to a net income of 8 cents per diluted share a year ago.
Recently, the company announced the launch of Square Loans in Canada. This service has distributed around $9 billion in loans to small businesses in the U.S. and Australia, where it has been active since 2014. Moreover, the company announced the introduction of a new generation of the Square Stand, the point-of-sale system that increases efficiency and transparency.
While more than 11% of ARK Fintech Innovation ETF (NYSEARCA:ARKF) is allocated to SQ stock, the ARK Innovation ETF, ARKK, leads the pack as the Wood-led fund with the most Square shares.
SQ stock is down over 55% year-to-date. Yet despite the decline, shares are trading at 101 times forward earnings and 2.7 times trailing sales. Meanwhile. the 12-month median for Square stock forecast is at $150.00.
CRISPR Therapeutics (CRSP)
Next up on our list of Cathie Wood stocks is the biotech name CRISPR Therapeutics (NASDAQ:CRSP). Analysts concur that it has revolutionized the field of genetic engineering by providing a fast, precise, and relatively inexpensive method for gene manipulation.
In mid-February, the company released Q4 FY21 results. Revenue increased to $12.9 million, up from $370,000 in the prior-year period. Loss per diluted share came in at $1.84, compared to net income per share of $1.50 in the prior-year quarter. Cash and equivalents ended 2021 at $2.38 billion.
Recently, the company has announced significant progress in clinical trials for the treatments for Type I diabetes, cancer, and ALS. These trials represent partnerships with notable biotechnology companies and pave the way for eventual distribution to the market.
Among ARK ETFs, the ARK Innovation ETF stands out as the one with the most CRSP shares.
So far in the year, the stock is down over 42%. Meanwhile, shares are trading at 23.6x forward earnings and 4.5x trailing sales. At present, the 12-month median forecast for CRSP stock is $143.00.
The final single stock on our list is Shopify (NYSE:SHOP), the multinational all-in-one e-commerce solution provider. This Canada-based tech giant offers a variety of tools for independent business owners. Services include logo design, online payment services, web design, logistics, and domain name registration.
In early May, Shopify reported its Q1 FY22 results. Revenue came in at $1.20 billion, up 22% YOY. Diluted earnings per share (EPS) was 20 cents. In the year before, it had been $2.01. Cash and equivalents ended the quarter at $7.25 billion.
The e-commerce giant recently announced it had reached an agreement to acquire Deliverr, an e-commerce fulfillment, and logistics company. This transaction is expected to strengthen Shopify’s delivery systems, improve infrastructure, as well as shorten delivery times.
Readers would be interested to know that the ARK Innovation ETF also stands out as the ARK fund with the highest amount of shares.
SHOP stock is down 73% YTD. Forward price-to-earnings and price-to-sales ratios stand at 175x and 11.4x, respectively. Finally, the 12-month median forecast for SHOP stock is currently at $527.50.
ARK Autonomous Technology & Robotics ETF (ARKQ)
Our next two choices are two exchange-traded funds managed by Cathie Wood. First up is the ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ). It invests in global companies that benefit from disruptive technologies, such as artificial intelligence (AI), automation, and robotics.
This actively managed fund has amassed net assets of $1.6 billion since its inception in September 2014. Its annual expense ratio stands at 0.75% per year.
ARKQ typically has 30 – 50 holdings. At the time of writing, it holds 39 stocks, of which the top 10 names account for almost 60% of the portfolio.
Among those are Tesla (NASDAQ:TSLA); technology solutions provider Trimble (NASDAQ:TRMB); Kratos Defense and Security Solutions (NASDAQ:KTOS); Japanese construction equipment manufacturer Komatsu (OTCMKTS:KMTUY); and UiPath (NYSE:PATH), provider of end-to-end platform for automation.
Autonomous vehicles have the biggest share (40.4%) of the fund’s technological exposure. Next are 3D Printing (17.2%) and robotics (16.4%).
With regards to the sector allocations, the fund is heavily weighted toward industrials (42.6%), followed by information technology (28.9%) and consumer discretionary (19.4%).
ARKQ stock has been in a downtrend since seeing record highs in November 2021. The ETF hit a 52-week low on May 9. It has also underperformed the broader market with a loss of about 37% since January and 39% over the past 52 weeks.
However, despite the potential setbacks by inflationary headwinds, the growth prospects of the robotics and autonomy industry appear strong. Thus, investors might want to keep ARKQ stock on the radar to buy the dips.
ARK Space Exploration & Innovation ETF (ARKX)
Our final discussion centers around the ARK Space Exploration & Innovation ETF (NYSEARCA:ARKX), which focuses on the space-related industry. It invests in global firms at the forefront or space-related activities or technologies.
The fund, which was launched in March 2021, typically holds 35 – 55 stocks. It currently has a portfolio of 35 holdings and total net assets of around $421 million. Its expense ratio is also 0.75%.
Industrials lead the way with 57.2%. Next are IT (22.7%) and communication services (7.4%). The actively managed ETF currently invests heavily in aerospace beneficiary companies (43.3%) that are engaged in agri-science, internet access, global positioning systems (GPS), construction, drones, or electric aviation vehicles.
The fund has around 60% of its investments in the top 10 stocks. The largest holding, Trimble comprises almost 10% of the portfolio. Next come Kratos Defense and Security Solutions; the 3D Printing ETF (NYSEARCA:PRNT); L3harris Technologies (NYSE:LHX); and AeroVironment (NASDAQ:AVAV).
ARKX stock is down around 28% YTD and 33% over the past 12 months. It hit a 52-week low in recent days.
Nonetheless, the global space industry prospects look bright as new players and emerging technologies are opening it as the new frontier. Thus, risk-tolerant investors with a horizon of three-to-five years could consider investing in ARKX using a small portion of their investment portfolios.
On the date of publication, Tezcan Gecgil 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.