Cathie Wood, the founder of asset management company ARK Invest, has made some impressive calls and predictions in recent years when it comes to growth and tech stocks. While I don't agree with all of her picks, there are certainly some stocks in her exchange-traded funds where I think she is ahead of the curve.
Let's take a closer look at two stocks Wood owns through ARK Invest that I've been investing in as well and like heading into 2022.
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1. LendingClub
My favorite stock that Wood owns, which also happens to be the largest position in my portfolio, is the digital marketplace bank LendingClub (LC). This fintech uses technology, data, and machine learning to streamline the online personal lending process. The stock has struggled in recent years, but management worked hard to make the company more efficient in 2020. Then the company closed on its acquisition of Radius Bank at the start of 2021, becoming one of the first fintech companies to acquire a bank charter.
The Radius Bank acquisition proved to be transformational, giving LendingClub access to cheap deposits while cutting down on other expenses, like external loan origination costs. Following the acquisition, LendingClub also chose to hold 15% to 25% of originations on its balance sheet rather than selling them to investors like the company used to do. Keeping these originations in-house is three times more profitable over the life of the loan. The transformation has yielded results faster than anyone could have imagined, allowing LendingClub to have profitable second and third quarters and completely catching the market off guard.
Wood appeared to be ahead of the market, purchasing shares in March before the market had really noticed the power of the model. However, then Wood sold about $33 million of the stock in September after seeing some nice gains. Still, the ARK Fintech Innovation ETF (ARKF -0.26%) owned just shy of 2 million shares as of Dec. 15, accounting for just over 2% of the ETF's portfolio. I would definitely recommend holding LendingClub long, not only because it's a fast-growing fintech with a superior model, but also because it is undervalued when you compare it to several similar fast-growing fintech companies.
2. Silvergate Capital
Wood's ARK Fintech Innovation ETF also owns nearly 440,000 shares of the crypto bank Silvergate Capital (SI -2.44%), which comprised more than 2.5% of the ETF as of Dec. 15. Silvergate was the first bank in the country -- and is still one of a few -- to create a real-time payments network in which two parties on the network can make transactions with one another in real-time that are cleared instantly. The platform, which is called the Silvergate Exchange Network (SEN), has quickly grown to more than 1,300 clients and has the first-mover advantage. SEN has enabled the bank to quickly bring in billions of deposits it doesn't have to pay any interest on, which are incredibly valuable, as well as lots of new customers to sell other banking products to and make fee income. Silvergate is also issuing lines of credit to customers who are collateralized by Bitcoin.
Silvergate stock has run up quite a lot. Even after a recent pullback along with other growth stocks, the stock is still up more than 127% this year. Wood sold a significant portion of Silvergate back in May, but I think it's still too early to sell Silvergate. The bank has another huge opportunity with stablecoins, which are digital assets linked to a currency or commodity. Earlier this year, Silvergate announced a partnership to be the exclusive issuer of Meta Platform's Diem U.S. dollar-backed stablecoin. I'm hopeful the bank will be able to roll out a pilot for this partnership soon. Also, as rates go up, Silvergate can benefit tremendously merely by deploying lots of its zero-cost deposits into securities with higher yields.
