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Should You Buy These 3 Multibillion-Dollar Cathie Wood Investments?

By Rich Duprey - Apr 14, 2021 at 10:08AM

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The famed money manager has made some massive bets on a handful of companies.

Cathie Wood is arguably the hottest name in investing today as all of her ARK Invest exchange-traded funds have more than doubled their investors' money in the past year. And because people like to go with a winner, Wood's ETFs are attracting more new money than virtually any other ETF in any given month.

While the eight ARK Invest funds hold stakes in dozens of companies, Wood isn't afraid to make some big bets on specific stocks either. Chinese e-commerce giant JD.com, for example, is held in four ARK ETFs for a total investment of $415 million, yet she has invested over $1 billion in nine separate companies. In three of them, she's gone really big, investing $2 billion or more.

Below, we're going to focus on those three, and also see how they're viewed by the many investors at Motley Fool CAPS. Hot money managers come and go, but using the wisdom of crowds to find investment options can also prove a rewarding strategy.

Skyscraper-like dollar sign under construction

Image source: Getty Images.

CAPS aggregates the opinions of tens of thousands of players to assign ratings to each stock based on its perceived likelihood of outperforming the market, from one to five stars, with five being best. Players are also rated based on how well their stock picks perform, with those earning higher ratings having more influence on a stock's rating.

In other words, if you're an investor with a great stock-picking track record on the platform, CAPS gives your opinion more weight.

Teladoc Health

Wood investment: $2.45 billion

CAPS Rating: 5 Stars

Virtual care leader Teladoc Health (TDOC 4.88%) suffered something of a setback when Amazon (AMZN 3.15%) announced its intention to enter the telehealth market this year, but maybe the media made more out of that than was warranted.

Over the years, Amazon has launched numerous products and services that were promised to disrupt whatever market they were in, but that ultimately flamed out. Fire phone, anyone? How about A9 Search, Auctions, PayPhrase, or Payments? Are you using Amazon Wallet? 

When the tech and e-commerce giant is successful, it tends to be wildly so, but Amazon also throws a lot of things at the wall to see what sticks, and Teledoc has already established a commanding presence in virtual health. 

Due to the pandemic, Teledoc's worldwide revenues doubled in 2020, and we can anticipate that its services will remain popular even after the threat of COVID-19 recedes, if only because virtual visits beat sitting in an overbooked doctor's office waiting room for hours waiting to be seen.

Teladoc's massive $18.5 billion acquisition of Livongo Health should also bolster its bottom line, as Livongo collects data on patients and, using artificial intelligence systems, "nudges" them to accept personalized health coaching and information.

Nearly 1,200 CAPS players have rated Teladoc, with 99% believing it will outperform the market, giving it a top 5-star rating. Its share price may be down 42% since Amazon's announcement, but there appear to be good reasons for the bullishness that Wood and the CAPS players are expressing about its prospects.

Square

Wood investment: $2.51 billion

CAPS rating: 5 stars

Mobile payments processor Square (SQ 3.97%) is held in three ARK ETFs, and it's easy to see why Wood likes this company. Although it faced some headwinds from the COVID-19 pandemic as businesses closed their doors, a reopening U.S. economy is poised to get that aspect of its operations growing again. Moreover, it has expanded its offerings, and now even includes a federally chartered bank, opening up even more potential opportunities to expand the products and services it offers.

Last year, it also faced the potential of a big-name company entering its space as a competitor when Apple (AAPL 1.62%) acquired Canadian start-up Mobeewave. That company's tech promises to turn every iPhone into a mobile payments terminal. So far, though, that has proved to be a mere blip on the radar for Square.

Shares might be down 13% from their recent high, but Square stock is up 386% over the past year. CAPS All-Star player Har1en says the fintech stock is a "Great player in the new cashless economy...[and] younger firms like Square are better positioned than the major financials to change and move with the times."https://caps.fool.com/Ticker/SQ/Commentary/Page1.aspx

Tesla

Wood investment: $3.69 billion

CAPS rating: 2 stars

Tesla (TSLA 1.24%) is by far Wood's biggest investment and is held in three ETFs where it is the largest position in each, amounting to almost 11% of ARK's total holdings. But the divergence in Wall Street analysts' sentiments about the electric car maker is reflected in its CAPS rating. Players have overall assigned it only two stars, suggesting they don't think the company will outperform the market for the foreseeable future. (Author's note: I also have an underperform rating on CAPS for Tesla.)

Investors' rationale for that view probably isn't based on a belief the EV leader is a bad company. Rather, they are likely concerned that its stock price is not tethered to its business fundamentals. (That's my reason for believing it will underperform.) Although China promises to be a big market for Tesla's cars, it faces a large and growing group of competitors there, and Warren Buffett-backed EV maker BYD just announced that it delivered over 16,300 cars last month, more than Nio (NIO -1.66%) and Xpeng (XPEV -4.60%) combined.

Tesla also had some big numbers released recently: It delivered almost 185,000 cars in the first quarter, far exceeding analysts' expectations. 

However, on the subject of Tesla's almost $700 share price, Roth Capital analyst Craig Irwin had this to say on CNBC this week: "People are just assuming that Tesla has no competition when they put this kind of lofty valuation on the company." He pegs its value closer to $150 per share.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$681.79 (1.24%) $8.37
Apple Inc. Stock Quote
Apple Inc.
AAPL
$138.93 (1.62%) $2.21
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$109.56 (3.15%) $3.35
JD.com, Inc. Stock Quote
JD.com, Inc.
JD
$65.95 (2.69%) $1.73
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
TDOC
$34.83 (4.88%) $1.62
Block, Inc. Stock Quote
Block, Inc.
SQ
$63.90 (3.97%) $2.44
Nio Inc. Stock Quote
Nio Inc.
NIO
$21.36 (-1.66%) $0.36
XPeng Inc. Stock Quote
XPeng Inc.
XPEV
$30.28 (-4.60%) $-1.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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