Cathie Wood has the courage of her convictions.
The polarizing investor who runs multiple mutual funds through her Ark Innovation ETF (NYSEARCA:ARKK) firm is notorious for sticking by her stock picks through good times and bad. And times have been mostly bad since the pandemic ended.
With a continued focus on disruptive technologies and start-up firms, Wood’s holdings tend to be of stocks that, while high growth, are also unprofitable and unpredictable.
At best, many of her stock picks are volatile. At worst, the equities have crashed and appear doomed. This helps to explain the reason her flagship Ark Invest has declined 75% since peaking in February 2021. Yet Wood remains a believer in her choices, and continues to say that it’s only a matter of time until she is vindicated.
Let’s examine three Cathie Wood stocks to release fast before they get worse.
Roblox (RBLX)
Online video game company Roblox (NYSE:RBLX) continues to be a major holding in Cathie Woods’ main Ark Innovation ETF despite its dreadful performance.
Since its 2021 IPO, Roblox stock has declined 61%, including a 3% decline so far in 2023. The stock has steadily eroded amid a lack of profitability and slumping user numbers coming out of the pandemic. Even talk of integrating artificial intelligence (AI) into the video game platform hasn’t helped the stock’s performance.
Yet Cathie Wood remains a believer. Roblox is one of the top 10 holdings in the ARKK fund. Wood currently owns more than $230 million worth of RBLX stock. The addition of Roblox has no doubt been a serious drag on the fund.
And the situation looks unlikely to improve anytime soon. In August, the company’s share price fell 21% after Roblox missed analyst forecasts for its Q2 financial results by a wide margin. At the same time, Roblox’s net loss swelled to nearly $300 million.
Tesla (TSLA)
The biggest holding in Wood’s flagship fund continues to be electric vehicle maker Tesla (NASDAQ:TSLA). The Ark Innovation ETF currently holds more than $700 million worth of TSLA stock, representing 10% of the fund’s weighting.
While not as depressed as RBLX stock, Tesla’s shares remain volatile and prone to big highs and lows. Currently Tesla’s stock is on a downswing amid ongoing market pressure. Since September 21, the EV maker’s share price has declined nearly 10%.
Also, reports show that Tesla is the most widely shorted automotive stock on Wall Street. According to S3 Partners, short sellers are betting $22 billion that Tesla’s stock price will move lower. By comparison, less than $2 billion of Ford Motor Co. (NYSE:F) stock is sold short.
Clearly, the smart money continues to have doubts about TSLA stock. At best, traders appear to feel that Tesla’s share price is grossly overvalued. Yet the automaker run by Elon Musk continues to be a Cathie Wood favorite.
Zoom Video Communications (ZM)
Cathie Wood’s second biggest position in the ARKK fund is in Zoom Video Communications (NASDAQ:ZM).
Unfortunately, the communications tech company doesn’t appear to have survived the run of the pandemic. After hitting up to $560 a share in 2020, ZM stock has crashed, falling a whopping 88% from its Covid-19 peak. The shares are now hovering near their 2019 IPO price and look unlikely to regain their former glory.
Despite this harsh reality, Cathie Wood continues to maintain a sizable stake in ZM stock, currently holding more than $550 million worth of shares in her Ark Innovation ETF. Yet, the outlook for Zoom suggests the company’s heyday is now behind it.
This year’s revenues are expected to be flat, and in a sign that remote work and video conferencing are declining, Zoom Video Communications recently ordered its own employees back to the office, news that generated ironic yet humorous media headlines.
On the date of publication, Joel Baglole 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.
