During the final months of 2021, the stock market witnessed significant selling activity in many growth companies, particularly in the technology sector. These sell-offs were driven by factors including slowing growth in stay-at-home stocks, lingering fears of inflation, and tax loss harvesting. As valuation multiples have compressed, it's become increasingly challenging for investors to navigate which stocks may be worth exploring for 2022.
Cathie Wood, the CEO of ARK Invest, has made a name for herself for making bold predictions about high-growth, innovative technology companies. As the sell-offs continue into 2022, Wood has shown her conviction as she's been increasing positions in three companies in particular.
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Palantir
Businesses are increasingly relying on data to deliver value. According to IDC, more than 80% of an organization's data will be unstructured by 2025. This means that important documents such as customer records, legal files, and more are siloed in irrelevant systems, which presents a big challenge for traditional business intelligence and analytics solutions. As a result, companies could spend years working with high-cost consulting firms attempting to build an in-house solution. But more often than not, these efforts do not lead to much progress. Subsequently, executives are pressured to find a flexible, scalable, and cost-effective solution to integrate with their current business.
After spending nearly two decades as a private company and raising billions of dollars in venture capital, Palantir Technologies (PLTR -2.51%) is showcasing that the adoption of its premier software platform, Foundry, is a superior market solution. As companies invest more into digital transformation, it is becoming more clear that the modern digital enterprise will need to rely on more than hosting records of data and producing metric-filled dashboards. As data becomes more complex, Palantir is attempting to pave the way to synthesize and analyze this data efficiently.
In its third-quarter 2021 financials, Palantir reported $392 million in revenue, representing 36% year-over-year growth. The company concluded Q3 earnings by guiding for full-year 2021 revenue growth of 40% and outlining a commitment to grow revenue by 30% or more for the next four years. Given the impressive financial results and the importance of Palantir's technology, it is not surprising that Wood has been accumulating shares in this innovative leader.
Over the last 12 months, Wood has increased her position in Palantir from roughly 1.9 million shares in January 2021 to 33.4 million shares today. Palantir has not been immune to the pullback in technology stocks as the company is down 30% in the last month alone. Wood has been taking advantage of this price movement, as she has added 2.7 million additional shares just in January.
Teladoc
Teladoc Health (TDOC -1.48%) operates in two industries that are constantly innovating: technology and healthcare. For the full fiscal year ended Dec. 31, 2020, Teladoc saw its revenue soar by 98%. The company quickly became a household name and a pandemic stock darling, and investors were rewarded with a 130% stock price increase. However, 2021 was a different story. Despite the company forecasting 80% revenue growth, the stock price plummeted as investors fear that Teladoc's growth is unsustainable and primarily fueled by the pandemic.
The massive sell-offs continued into 2022; the stock price is already down 23% year to date. One silver lining is that Wood has doubled down on her conviction and has been adding to Teladoc in droves. During the first three weeks of 2022, Wood has added over 270,000 shares in Teladoc. And this was after significant buying activity throughout the final months of 2021. It should be no surprise that Teladoc represents a top-10 position in each of the following exchange-traded funds (ETFs) managed by Wood: ARK Innovation ETF, ARK Next Generation Internet ETF, ARK Fintech Innovation ETF, and ARK Genomic Revolution ETF.
Coinbase
Coinbase Global (COIN -0.91%) provides financial infrastructure and technology for the crypto economy. The company primarily serves as a broker through its marketplace on which users can buy and sell crypto assets.
Heavy selling activity has mutated beyond stocks as cryptocurrencies are the latest asset to experience valuation compression. After reaching record highs in November 2021, Bitcoin and Ethereum began 2022 in a downward spiral. During the first week of January, Bitcoin experienced its longest continuous price decline since 2018. Moreover, leading cryptocurrencies Ethereum and Solana have fallen over 20% since the beginning of the year.
Coinbase's business is heavily reliant on transaction fees associated with buying and selling crypto. This means that in some ways Coinbase's stock price will move with the volatility of cryptocurrencies. The company is now trading at 52-week lows as investors continue moving out of stocks and crypto and more toward cash.
Despite the decline in stock price, Coinbase has been working diligently to diversify its business. Namely, the company announced that it will be creating its own non-fungible token (NFT) platform. As Coinbase looks to build the market leader powering the crypto economy, Wood has continued to buy shares in the company. Coinbase holds the top position in two of her exchange-traded funds: ARK Next Generation Internet ETF and ARK Fintech Innovation ETF.
