Since Ark Investment Management opened in 2014, fund manager Cathie Wood has amassed $15 billion in assets under management by taking on risks that other fund managers often won’t. Sometimes it works, as with a hugely successful bet on electric-vehicle maker Tesla Inc. (ticker: TSLA). And sometimes, as with the telemedicine company Teladoc Health Inc. (TDOC), it doesn’t.
[Sign up for stock news with our Invested newsletter.]
But Wood’s idiosyncratic, gutsy approach to betting on innovation leads the market to watch what she’s doing. For the second quarter, Wood’s new names may seem surprisingly familiar. After a rough two-year period, her choices are conservative and blue-chip by her standards. There are still some areas where she aims high, expanding existing positions in Boston-based biotech company Ginkgo Bioworks Holdings Inc. (DNA) and robotics software company UiPath Inc. (PATH), as Ark reduced positions in stocks like DraftKings Inc. (DKNG) and Shopify Inc. (SHOP).
The firm’s flagship fund, the Ark Innovation ETF (ARKK), lost about two-thirds of its value last year, as shares dropped to $31 from $94. So far, they’re back up to $41.24 as of Aug. 16. So picks like these are part of the comeback plan.
Here’s a look at Wood’s new positions as of June 30, as reported in Ark’s second-quarter disclosure:
| New Stock Position | Shares Bought | Value | Price per share at purchase |
| Palantir Technologies Inc. (PLTR) | 6,842,989 | $104.9 million | $15.33 |
| Meta Platforms Inc. (META) | 199,745 | $57.3 million | $286.98 |
| Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) | 144,738 | $14.6 million | $100.91 |
| SoFi Technologies Inc. (SOFI) | 281,770 | $2.3 million | $8.33 |
| Pure Storage Inc. (PSTG) | 183,504 | $6.8 million | $36.82 |
| The Trade Desk Inc. (TTD) | 87,874 | $6.8 million | $77.21 |
| 3iQ Bitcoin ETF (BTCQ) | 884,731 | $4.4 million | $4.97 |
Palantir Technologies Inc. (PLTR)
This is the biggest of Wood’s new bets. After a few incarnations through the years, especially as a defense contractor, Palantir’s current strategy focuses on data analytics software to enable artificial intelligence applications. Its products have been key to global policy management of the COVID-19 pandemic and Ukraine’s battle to repel Russia’s invasion.
The company handily beat Wall Street’s first-quarter profit estimates and second-quarter results were in-line, but Wedbush Securities analyst Dan Ives said revenue from Palantir’s AI platform was ahead of schedule, driven by government contracts. The company raised its guidance for the second half, and is seeing “unprecedented” demand as AI gains momentum, Ives said.
Ark added 6,842,989 shares of PLTR during the quarter at a cost of $104.9 million, or $15.33 per share. PLTR closed at $15.45 on Aug. 16.
Meta Platforms Inc. (META)
Meta has talked a big game about metaverse avatars and artificial intelligence, but its second-quarter earnings beat was driven by better-than-expected results in advertising, especially in its TikTok competitor Reels. The company also said it was trimming both operating and capital expenses more than it had promised when it vowed that 2023 would be its “year of efficiency,” Evercore ISI analyst Mark Mahaney said.
“The Year Of Efficiency is being accompanied by the Year Of Acceleration,” Mahaney wrote, noting that Facebook’s ad business is recovering from a 2022 slump one to two quarters faster than expected. “How could a stock that is now up 150% YTD possibly be one of our Top Picks?! Because valuation is still cheap.”
Ark added 199,745 shares of META during the quarter at a cost of $57.3 million, or $286.98 per share. META closed at $294.29 on Aug. 16.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
On its face, this bet is kind of a dud: Ark sold its position in AI-chip designer Nvidia Corp. (NVDA), which has tripled this year, in favor of TSM. Ark made that wager believing that Nvidia is overvalued and that the AI boom will favor a player that handles manufacturing for multiple companies racing to supply what’s expected to be an explosive new market.
Wood invested $14.6 million into the Taiwan-based semiconductor manufacturer, which makes chips for clients like Apple Inc. (AAPL) and also Nvidia. Ark then bought another $3 million worth in July. But TSM is up just 2% year to date as Nvidia has more than doubled.
TSM’s second-quarter earnings report failed to impress because of weak demand for traditional products like smartphone and laptop chips, CFRA Research analyst Hazim Bahari said.
“We see revenue turning flattish in 2023 after a robust 2022 (+43%), with aggressive customer order cuts across both mature and core leading-edge nodes driven by weak end-demand trends (smartphone, PCs, tablets) and elevated inventory build,” Bazari wrote. “We believe top-line growth will return in 2024 (+23%), led by its high-performance computing segment.”
Ark added 144,738 shares of TSM during the quarter at a cost of $14.6 million, or $100.91 per share. TSM closed at $91.78 on Aug. 16.
SoFi Technologies Inc. (SOFI)
SoFi is a mobile-banking app popular with millennials, one that struggled after its initial public offering in late 2020 but whose shares have climbed more than 75% this year.
Wood appears to be betting that SoFi is a so-called tipping point story, or an internet firm that is just about to turn profitable and may scale profits very quickly once it turns into the black. In the second quarter, revenue of $489 million beat Wall Street estimates by $12 million. Earnings before interest, taxes, depreciation and amortization, or EBITDA — often a precursor to profits as measured by generally accepted accounting principles, or GAAP — hit $77 million, well above estimates of $59 million, according to Goldman Sachs analyst Michael Ng. Wall Street consensus expects the company to turn profitable next year.
Ng expects SoFi to benefit from the resumption of payments on federal student loans since part of its business is refinancing student borrowing. “SOFI continues to deliver improving profitability and is targeting GAAP net income profitability in (the fourth quarter of 2023), which should be supported by an improving lending environment and a continued deposit growth pace of more than $2 billion per quarter.”
Ark added 281,770 shares of SOFI during the quarter at a cost of $2.3 million, or $8.33 per share. SOFI closed at $8.26 on Aug. 16.
[READ: 8 of the Best Tech Dividend Stocks to Buy]
Pure Storage Inc. (PSTG)
The special sauce at Pure Storage is storage for data centers that run on flash technology, rather than traditional disk arrays, CFRA Research analyst Shreya Gheewala said. Flash has been gaining share because it is cheaper, quieter and uses less power than older technology.
“Our ‘Buy’ rating reflects our view of PSTG as a beneficiary of the shift to all-flash and cloud oriented storage capabilities within data centers and away from the traditional and more complex disk-centric designs,” Gheewala wrote on Aug. 12. CFRA says sales grew 26% in the already-completed fiscal 2023, will grow just 8% in fiscal 2024 (ending in January) this year, and resume a 20%-plus growth pace in fiscal 2025.
Shares are up more than 35% this year, all of the gain coming since the beginning of the second quarter.
Ark added 183,504 shares of PSTG during the quarter at a cost of $6.8 million, or $36.82 per share. PSTG closed at $36.99 on Aug. 16.
The Trade Desk Inc. (TTD)
Wood’s pick of this Los Angeles-based online advertising technology company is popular: It’s up 65% year to date and it joined the Nasdaq-100 index in July.
One of Trade Desk’s leading products is Unified ID 2.0, which the company calls an industry-wide approach to identity that delivers relevant advertising as an alternative to third-party cookies. Clients include Walmart Inc. (WMT) and Warner Bros. Discovery Inc. (WBD).
Trade Desk is another new-to-profitability tipping point story, having delivered GAAP profits of 8 cents a share in the first half of 2023 after bleeding money in early 2022. But its stock price values the company at about 17 times 2024 revenue and 43 times next year’s adjusted EBITDA, far higher than the 2.5 times sales and 7.3 times EBITDA that comparable companies command, Morningstar analyst Ali Mogharabi said in a report from Aug. 14.
“The firm has positioned itself well to benefit from growth in the connected TV market and expanding digital ad spending among retailers,” he said. “We still believe the stock is significantly overvalued.”
Ark added 87,874 shares of TTD during the quarter at a cost of $6.8 million, or $77.21 per share. TTD closed at $72.74 on Aug. 16.
3iQ Bitcoin ETF (BTCQ.TO)
This purchase represents a return to Ark’s roots as a cryptocurrency enthusiast, but the fund’s year-to-date gain was all accomplished in the first quarter before Ark took its stake.
It’s going to move with the price of Bitcoin, which is volatile. The fund is up 75% this year but fell 62% last year.
Ark added 884,731 shares of BTCQ during the quarter at a cost of $4.4 million, or $4.97 per share. BTCQ closed at 6.41 Canadian dollars ($4.74) on Aug. 16.
More from U.S. News
7 Best Long-Term ETFs to Buy and Hold
10 Best Industrial Stocks to Buy in 2023
What Is a Single-Stock ETF? 7 Options to Consider
7 Stocks Cathie Wood is Buying originally appeared on usnews.com
Update 08/17/23: This story was previously published at an earlier date and has been updated with new information.
