Cathie Wood is one of the market's best known growth investors these days. She's the CEO, co-founder, and chief investment officer of Ark Invest, the family of exchange-traded funds (ETFs) that crushed the market in 2020 with jaw-dropping returns before being humbled since last year.
Wood puts out daily transaction reports, providing insight into the stocks she's buying and selling. What is Ark Invest building up these days? Wood added to here positions in Cloudflare (NET -1.05%), DraftKings (DKNG 0.59%), and Robinhood Markets (HOOD -1.10%) on Monday. The three stocks are down sharply, off between 59% and 88% from last year's highs. Let's see why she thinks they will bounce back.
Image source: Getty Images.
Cloudflare
We're doing a lot of cloud hopping these days, and Cloudflare is cashing in on the movement. The provider of cloud networking services for business began as a content-delivery network with an emphasis on heightened security. Like other companies thriving in the Software-as-a-Service market, Cloudflare has expanded its offerings to get its clients to spend more on its platform.
Revenue soared 52% in 2021, just ahead of the 51% annualized growth that it has averaged over the past six years. Cloudflare is keeping its clients happy. It closed out the year with a record net retention rate of 125%. This means that returning customers are spending 25% more on the platform than they were a year earlier.
The timing of Wood's purchase is interesting Cloudflare reports its first-quarter results on Thursday. Buying into Cloudflare this week -- ahead of fresh financials -- implies that Wood sees a strong report. It's also hosting its annual Investor Day next week, giving it another chance to tell its side of the story.
DraftKings
DraftKings has followed the path of many of Wood's disruptive growth stocks. The online gambling and fantasy sports specialist was a rock star when it more than quadrupled in 2020.
It has given back nearly all of those gains since last year, but business is booming at DraftKings. It enters 2022 with an average of nearly 2 million monthly unique players during the final three months of last year. Profitability has been challenging, given the costs to build out its expanding gaming empire, but revenue still climbed at a hearty 47% clip in its latest quarter.
This is another case of shrewd timing. DraftKings will provide financial results on Friday morning. Betting on live sports isn't going away, and DraftKings keeps rollout out platforms for incremental top-line growth. Analysts see revenue climbing 53% this year, but they're bracing for a slow start in the first quarter that it will make official late this week.
Robinhood Markets
Like DraftKings and Cloudflare, Robinhood shares have fallen sharply since hitting all-time highs last year. A big difference is that Robinhood isn't growing at the same ambitious pace of the other two stocks.
Robinhood was a speedster a year ago, but its prospects have dimmed sharply through its first five quarters of public trading. The online trading platform for options, crypto, and stocks saw its revenue more than quadruple in the first quarter of 2021. By the end of last year, the top-line increase decelerated to a modest 14% year-over-year increase.
Things have gotten worse in its latest quarter. Revenue plummeted 43% with double-digit percentage declines in its options, crypto, and equities trading businesses. Its net cumulative funded accounts has stalled over the past four quarters, something that wouldn't be a problem if those folks were trading a lot less now. Robinhood is rolling out new products, but did its window of opportunity for greatness close last year? Wood adding to her languishing Robinhood position doesn't make as much sense as Cloudflare and DraftKings, but sometimes you catch all kind of things in a deluge.
