It's hard to buy disruptors when the market itself is being upended. Cathie Wood's Ark Invest family of exchange-traded funds (ETFs) has proven mortal after recording monster gains in 2020, but the widely followed stock picker isn't shifting gears. Wood continues to buy stocks even after they've fallen hard.
Ark Invest's CEO and top stock picker added to her positions in Sea Limited (SE -1.42%), Robinhood Markets (HOOD -1.34%), and Coinbase Global (COIN -2.42%) on Monday. The three stocks are trading 65%, 84%, and 55% below last year's all-time highs. What does she see that the rest of the market is missing? Let's take a closer look at her Monday purchases.
Singapore-based Sea Limited was already correcting alongside most of last year's growth stock darlings, but things got even worse this week. The major player in gaming, fintech, and e-commerce took an 18% hit on Monday after India banned Free Fire, Sea Limited's most popular mobile game.
It's not an insignificant event, but was this worthy Sea Limited shedding nearly a fifth of its value? There are so many other moving parts to Sea Limited, and it all adds up to monster growth. Sea Limited has managed to deliver four consecutive years of triple-digit revenue gains. India banning dozens of apps is unfortunate, but it doesn't have to be permanent. Other Sea Limited apps are currently still available in the world's second-most populous nation.
The hardest-hit of the three stocks is Robinhood Markets. It's a been a wild -- and ultimately unfortunate -- ride for investors who chased its summertime initial public offering (IPO) higher. The online trading platform for options, crypto, and stocks went public at $38, peaking at $85 a week later. It has fallen all the way down to the low teens.
Robinhood couldn't have timed its Wall Street debut any better, hitting the market after a record second quarter in crypto and options trading activity. It didn't last. Investors became concerned when funded trading accounts declined sequentially the following quarter. Throw in slow-footed expansion, controversial business practices, and a finicky market and it's been a recipe for disaster. After back-to-back quarters of sequential declines in monthly active users and revenue, the stock has a lot to prove. Wood is buying, but not too many people are joining her on Robinhood Markets just yet.
Coinbase is another next-gen trading platform that hit the market last year, but it's a faster-growing pure play in the volatile crypto market. Coinbase is the leading exchange for digital currencies, and Wood has made a bigger bet on Coinbase than Robinhood. It's the fifth-largest holding across all of the Ark Invest ETFs.
Revenue soared 330% in its latest quarter on a year-over-year basis, and its bottom line grew even faster. Like Robinhood, Coinbase did see a sequential dip in revenue and monthly transacting users. Analysts see flat top-line growth at both companies in 2022, but Coinbase is the undisputed leader in the crypto market. It's also trading a low trailing earnings multiple, even if that is inflated by one-time events. Looking ahead, Coinbase is trading at less than 30 times forward earnings, a more than reasonable premium for a dynamic niche leader. With a Super Bowl ad on Sunday making waves, Coinbase continues to be the top draw in the growing realm of cryptocurrency stocks.