Cathie Wood, the founder of ARK Invest, is taking Wall Street by storm with her unconventional thematic investing. Namely, she follows an innovative fund style to find hyper-growth stocks with game-changing technology.
Certainly, her unique method is working.
To be sure, five out of six ARK ETFs posted more than 100% returns in last year alone. Result? Her funds saw a massive inflow of $20.6 billion, according to data from Morningstar, Portfolio Insider, and Nasdaq.
Recently, Wall Street saw a heavy rotation into value stocks. But don’t count Cathie Wood as one of them. Instead, she is doubling down her bets on these innovative companies.
“The benchmarks are filling up with value traps” due to the pace of innovation in fields including artificial intelligence and robotics, Wood said. “We think the big risk is in the benchmarks, not what we’re doing.”
Billionaire Cathie Wood's predictions are must-follow because of her historic returns in the last three years -- with her picks soaring many times above their original share prices.
Case in point: Last year, Ms. Wood’s ARK Genomic Revolution ETF, ARK Innovation ETF, and ARK Next Generation Internet ETF reaped returns of 159%, 203%, and 157%, respectively.
Now, here are four technology stocks with huge potential that Cathie Wood has bought for her funds:
1. Coinbase (NASDAQ: COIN)
Surely, Cathie Wood is bullish on cryptocurrency. She has been buying hand over fist in the largest cryptocurrency exchange and digital wallet service provider Coinbase.
On the day when Coinbase made its public debut, ARK Invest scooped up 749,205 shares. A few days later, it added another 340,273 shares (worth nearly $112,970,000 million) to its position.
Never shy from making bold predictions, Wood believes that digital wallets can develop into the most valuable technology of this era, pointing out its unprecedented speed of organic growth.
"Digital wallets could become the most valuable technology developments per user of almost anything. We're pretty excited about that. If you were to draw a graph as we did in our big ideas showing how JPMorgan Chase & Co. (NYSE: JPM) got to these levels, it was one acquisition after the other, whereas Cash App and Venmo, because they are viral in nature, have gotten there organically," Cathie Wood said.
Recent reports have supported Wood’s prediction.
The digital wallet payments have surpassed the physical card for usage at contactless in-store payments and at the point-of-sale (POS) in 2020, according to the Global Payments Report. Plus, in-store cash payments fell by at least 50% in 2020 in advanced economies.
2. Unity Software (NYSE: U)
A real-time 3D development platform Unity Software is trading at a bargain-basement price, in Cathie Wood’s view.
She has been boosting her Unity Software stake over the last two months as the stock fell by 34% year to date. Despite the recent selloff, the company’s future fundamentals look strong based on revenue growth projections.
Unity Software expects 2021 revenue in the range of $950 million to $970 million, in line with the company’s plan of sustaining 30% revenue growth in the long run.
Unity CEO John Riccitiello said: “As the leader in creating and operating tools for the world of real-time 3D content, we continue to invest with the intent to capture what we believe is a substantial opportunity ahead in 2021 and years beyond.”
3. Shopify (NYSE: SHOP)
Wood believes that Shopify can be as big as online retail giant Amazon (NASDAQ: AMZN) someday.
As a result, Cathie Wood saw the dip in Shopify stock as a buying opportunity. Her firm added to its existing stake in e-commerce platform last week, according to Portfolio Insider.
"We're trying to figure out how Amazon is going to deal with this notion of individuals seeing something on Instagram or elsewhere on Facebook or on Twitter, or on Snap and just buying there," Wood said. "That's a Shopify-enabled commerce opportunity and we think it's going to be big."
Recently, Shopify’s stock price pulled back slightly from its recent all-time high of $1,500 that it had hit early in February.
Regardless of the short-term price movements, SHOP’s stock price upside is likely to be tightly wounded to its growth trends. So far, so good: Shopify’s fourth-quarter revenue jumped 94% while 2020 revenue surged 86%.
4. Sea Limited (NYSE: SE)
Cathie Wood has also been on a shopping spree with Sea Limited this year. The biggest lure of Sea Limited is how they can integrate dozens of their businesses into each other.
Sea Limited has tentacles in eSports, mobile gaming, e-commerce, digital payments, and food delivery services. And the company is aggressively expanding its market penetration outside its home country in China, especially in Latin America and Southeast Asia.
These segments have generated triple-digit revenue growth for Sea Limited. As a result, its consolidated revenue grew more than 100% in 2020, and it expects to extend that momentum into 2021.
Cathie Wood first initiated a position in Sea Limited during the final quarter of 2019, and she has only continued to add her stake over time.
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