Cathie Wood's ARK Invest exchange-traded funds (ETFs) suffered a meltdown in 2021 as her tech-laden funds saw the market largely rotate away from the sector.
That doesn't mean she's not a sharp investing guru; she's certainly still worth watching. Although her ETFs lost an average of 15% last year compared to a 27% gain by the S&P 500 (double its historical average), Wood's funds have an index-beating return over time. ARK Innovation (ARKK -4.58%) is up 327% over its lifetime versus a 122% gain by the market benchmark, ARK Autonomous Technology & Robotics (ARKQ -2.36%) has gained 273%, and ARK Next Generation Internet (ARKW -4.33%) has tacked on 451%.
While no investors should blindly follow the stock picks of any investing sage (not even Warren Buffett) without doing their own due diligence on the companies first, seeing the stocks a guru has picked is a good way to generate ideas. That's why you should consider examining the following trio of stocks more closely.
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1. Roblox
Online gaming platform Roblox (RBLX -4.46%) had the proverbial roller coaster ride in 2021 as Wall Street fretted over its ability to match the strong performance it enjoyed during the lockdown period of the pandemic. As a potential play on the metaverse -- the virtual world where people can interact with one another or even conduct business -- Roblox's platform is already perfectly situated because it creates a virtual space for interaction within a variety of games in the Roblox environment.
Interest in the metaverse has soared following Facebook's name change to Meta Platforms. In turn, investors bid up Roblox stock to new all-time highs of $141 a share following third-quarter results that showed revenue doubling year over year to $509.3 million, and key engagement metrics like revenue bookings, average daily active users (DAUs), and hours engaged all rising by double-digit percentages. The stock has since fallen to $79 per share.
Wall Street is still mostly unsure, and KeyBanc analyst Tyler Parker sees management's forecast for December's numbers as suggesting a slowdown is coming. Where Parker had previously forecast $800 million in fourth-quarter bookings, he now believes Roblox will book $780 million.
Not everyone agrees. BTIG analyst Clark Lampen says Roblox user registrations are "impressive" in a world returning to normalcy. He reiterated his buy rating and $133 price target, implying a 50% gain from where it currently trades.
Wood owns over 1.3 million shares of Roblox in her ARK Next Generation Internet ETF that she purchased at an average of $86 per share. That's not a large enough position to make it a top 10 holding, but it's a substantial bet on this growing online gaming stock.
Image source: Getty Images
2. Sea Limited
Singapore-based Sea Limited (SE -1.05%) is another online gaming stock, but it is more than a one-trick pony -- it also operates a thriving e-commerce site, Shopee. The two divisions are on fire, dominating their respective spaces.
In gaming, Sea's Garena unit saw Free Fire, which was launched in 2017, became the most-downloaded battle royale mobile game in the first half of 2021, according to app tracker App Annie. It kept up that pace throughout much of the rest of the year.
Its other division, Shopee, is the No. 1 retail app in Southeast Asia, according to the website Apptopia, and recently overtook MercadoLibre as the top e-commerce app in Latin America. It's now Sea Limited's largest market by monthly active users.
Sea has also dipped its toe into digital financial services with SeaMoney, which had 39 million users at the end of the third quarter. It offers mobile-wallet services, payment processing, and credit services under various brands such as AirPay, ShopeePay, and SPayLater.
Although Wood has sold off some of her stake in Sea Limited, she's been slowly accumulating more shares as its price has fallen in November and December. She currently has over 800,000 shares in two ETFs with an average price of around $190 per share.
There doesn't seem to be much that Sea Limited touches that doesn't turn to gold, and with this tech conglomerate down 47% from recent highs, its stock is one you can buy now and easily hold onto for 10 years or more.
Image source: Tesla
3. Tesla
Even though Wood has sold some large bundles of Tesla (TSLA -5.59%) stock over the past year, the electric-vehicle (EV) maker remains ARK Invest's largest total holding, spread out over four ETFs.
Tesla represents over 8.4% of the investing guru's combined portfolio value at a market value of almost $1.3 billion. Considering she has an estimated average purchase cost of $322 per share, it's not surprising she would -- from time to time -- trim some of her 3.4 million shares, which are trading north of $1,000 per share.
Tesla is the largest EV maker in the world with over 936,000 deliveries in 2021, almost all of which were its Model 3 sedan and Model Y hatchback SUV. It contends that it undercounts the total, though, because a vehicle is included in the count only if all the paperwork is correct and it has been transferred to the customer.
However, Wall Street mostly believes that despite the fact that Tesla's vehicles make up an increasing percentage of car sales, its stock is vastly overvalued. Certainly there is an argument to be made for that, because with a market valuation in excess of $1 trillion, the EV manufacturer is worth more than the next 30 or so automakers combined!
But Tesla is also a very profitable EV maker, and has been for several years running, something most other EV stocks can't claim. Although its stock price may seem out of reach for most investors, many brokerages have not only eliminated transaction fees, but also allow for the purchase of fractional shares. Because of that, Tesla can now be a part of most anyone's portfolio.
