If you’re looking for cheap Cathie Wood stocks to buy in October, you might want to stay away from the controversial portfolio manager’s latest fund.
On Sept. 27, Wood’s investment firm, Ark Invest, announced that it had launched the ARK Venture Fund, a closed-end fund that invests in both public and private companies.
For a minimum investment of $500, investors get a portfolio of 25-50 holdings. The only downside: the fund is illiquid and you pay total fees of 4.22%.
Let me save you the trouble. Don’t even think about buying shares. The fees are too high for retail investors.
If you want to use some of your “fun” money to bet on cheap Cathie Wood stocks, you’re wiser to buy one of her ETFs that charge approximately 0.75%. If you’re more aggressive, consider these seven.
|ZM||Zoom Video Communications||$73.59|
Up front, I want to say that my selection process wasn’t scientific. I’ve chosen the top-weighted holding from seven different Ark Invest ETFs. Tesla (NASDAQ:TSLA) is the top holding (10.44%) of Wood’s ARK Innovation ETF (NYSEARCA:ARKK), her firm’s largest fund by total assets.
If you don’t know the story about Wood’s bold predictions about TSLA’s share price, I suspect you’ve been living in a cave somewhere. Google “Cathie Wood Tesla $4,000.” There are plenty of articles to get you up to speed.
In the meantime, Wood said in April that she sees the stock hitting $4,600 in 2026. Tesla’s shares split 3-for-1 on Aug. 24, so dial that projection back to $1,533 ($4,600 divided by 3). Based on its current price of $267,93, it has to appreciate by 472% over the next 51 months.
It’s more than doable. However, it won’t get there without a few bumps in the road.
Barron’s recently reported that Piper Sandler analyst Alexander Potter believes that the analyst delivery estimates for Q3 2022 are too high. He believes that the company will deliver 354,000 electric vehicles (EVs) in the third quarter, 26,000 less than his previous estimate, and 4,000 less than the consensus estimate.
Potter’s skeptical about the delivery numbers from all four of its existing factories. As a result, he cut his target price to $340 from $360. Despite the cut, he still rates it a Buy.
TSLA is one of the best cheap Cathie Wood stocks to buy because it’s trading at 14.7x sales, cheaper than it’s been since 2019.
Exact Sciences (EXAS)
Exact Sciences (NASDAQ:EXAS) is the top holding of the ARK Genomic Revolution ETF (BATS:ARKG) with a 6.77% weighting. The company’s cancer detection diagnostics tests: Cologuard, Oncotype DX, and Oncomap ExTra are at the center of its plans to eradicate cancer.
In the second quarter, excluding Covid-19 testing, its revenues increased by 26% over last year, to $508 million. A good chunk of the revenue ($344 million) was from its Cologuard cancer detection test, with the rest ($154 million) from its Precision Oncology business.
For all of 2022, it expects revenues of at least $1.98 billion. Unfortunately, it doesn’t make money. In the second quarter, its operating loss was $159.6 million, down from $171.7 million a year earlier.
Analysts love this stock. Of the 20 that cover it, 18 rate it a Buy or Overweight, with an average target price of $70.06. That’s more than double where it’s currently trading.
Down more than 60% YTD, it trades at 3.09x sales, about one-quarter of its five-year average. If you don’t mind investing in companies that lose money, you couldn’t get behind a better cause.
Zoom Video Communications (ZM)
Zoom Video Communications (NASDAQ:ZM) is the second-largest holding of the ARK Next Generation Internet ETF (NYSEARCA:ARKW) with a weighting of 7.29%.
In the past month, I’ve been on video calls using Skype, RingCentral, and Google Meet. Sorry, no Zoom. And that’s what I keep wondering. Is there really a big difference between Zoom’s product and the many competitors?
Apparently, the company was wondering the same thing, so it created a new logo that lets people know it os about so much more.
“What started as a video meeting app quickly moved into broadcast webinars, connected conference rooms, and more, and it continues to evolve and expand,” Zoom Chief Marketing Officer Janine Pelosi said in a Sept. 12 blog post. “This evolution is more than a decade in the making. You will see it reflected today in our new look and refreshed visual identity. You’ll also see it in the innovation in our product offerings.”
I guess this innovation is what Cathie Wood sees in the company behind the video meeting app.
Hey, and it’s relatively cheap at 5.41x sales, well off its 2020 high of 51.08x.
Trimble (NASDAQ:TRMB) is the second-largest holding of the ARK Autonomous Tech. & Robotics ETF (BATS:ARKQ) with an 8.30% weighting.
Held by at least one other Ark Invest ETF, Wood’s clearly excited about the industrial technology company that got its start in GPS (global positioning system) but has morphed to be so much more.
For example, it recently acquired B2W (Bid2Win), a company that provides specialized software for heavy civil construction management.
B2W will slide in under Trimble’s Buildings and Infrastructure segment. In the second quarter, this segment generated $101.4 million in operating profits from $382.6 million revenue. It’s the company’s largest revenue generator.
I looked back at some of the articles where I recommended Trimble stock. One of them was in August 2021. Funnily enough, it was for 10 Stocks to Buy From Cathie Wood’s Fleet of ETFs.
I liked TRMB because it generates decent free cash flow while also growing it at the same time. In 2021, its FCF was $704.4 million, up from $615.2 million in 2020, and $516.0 million in 2019 with a compound annual growth rate of nearly 17%.
The way I look at it, any business that can move the construction industry out of the stone age is going to be a winner over the long haul.
Trimble’s PEG ratio hasn’t been this cheap since 2019.
I didn’t want to select Shopify (NYSE:SHOP) over Block (NYSE:SQ).
However, the Canadian e-commerce platform is the number one holding of Wood’s ARK Fintech Innovation ETF (NYSEARCA:ARKF) with a weighting of 9.31%, 27 basis points higher than the parent company of Square and Cash App.
I guess that’s the way the cookie crumbles.
It has not been a good year for CEO and co-founder Tobi Lutke. Its stock has lost more than 80% of its value and 85% from its November 2021 52-week high of $176.29.
In late July, Lutke was forced to cut 10% of its workforce due to the slowdown in e-commerce post-pandemic. Lutke bet that e-commerce would continue to grow at a much faster pace than physical retail. Unfortunately, for his wealth and those of his long-time shareholders, he was wrong. People have returned to in-store shopping in a big way.
Further, his executive management team has completely turned over in the past year, giving the impression that he’s impossible to work with and for.
And, of course, who can forget his grab for power in April that saw proposed governance changes that would cement his role with the company for years to come? The changes took effect on June 10.
While all of this is unsettling, it could be the best thing that could have happened to the company and Lutke. Now, it’s been forced to better divide its resources between offline and online commerce.
At the height of Shopify’s success in 2020, it had a P/S ratio of 56.0. Today, it’s one-eighth that multiple. The risk/reward proposition is tilted back in the investor’s favor.
Iridium Communications (IRDM)
Iridium Communications (NASDAQ:IRDM) got a bit of an assist from Apple (NASDAQ:AAPL) at the tech company’s iPhone 14 launch in early September.
Apple announced that it was partnering with Globalstar (NYSEAMERICAN:GSAT) to provide its customers with text-based emergency services when they’re in areas with zero or little cell service.
BWS Financial analyst Hamed Khorsand believes that this helps pave the way for Iridium’s low Earth orbit satellite network to obtain the same type of gig from other handset makers.
The company recently signed an agreement with an unnamed smartphone partner that will see its technology embedded in the smartphone company’s equipment.
Iridium is the second-largest holding of the ARK Space Exploration & Innovation ETF (BATS:ARKX) with a 7.86% weighting.
The company’s revenue in Q2 2022 increased by 16.7% to $174.9 million. Meanwhile, its operational EBITDA (earnings before interest, taxes, depreciation and amortization) rose by 11.8% to $105.5 million.
Compared to Globalstar’s EBITDA margins, Iridium’s a big money-maker.
Of all the names on this list, Xometry (NASDAQ:XMTR) is the only name I am completely unfamiliar with. It turns out to be the largest holding of the The Printing ETF (BATS:PRNT) with a 5.62% weighting.
Xometry is the largest online marketplace for custom manufacturing. You upload a 3D model of the part or parts you need manufactured and Xometry’s AI-enabled marketplace scours its 5,000 suppliers to come up with a price and next steps. I’m oversimplifying the process, but that’s the gist of it.
Xometry went public in July 2021, selling its shares at $44, and generating $325 million in net proceeds in the process.
It used some of those funds to buy Thomas, a leader in product sourcing, for $300 million in December 2021. I remember Thomas for its big red product sourcing books that you could scour through at public libraries. Of course, everything’s online now.
Does it make money? Not yet.
In Q1 2022, it lost $12.6 million on a non-GAAP basis on $83.7 million in revenue. However, revenues jumped 90% YOY based on the Thomas acquisition and an increase in the number of Marketplace Active Buyers and the amount those buyers spent on the Marketplace.
Thanks to Cathie Wood, I’ve found a new company to admire from afar.
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.