Cathie Wood kicked off the first two weeks of November with a buying spree. It certainly appears that the co-founder and CEO of Ark Investment Management has been combing through recent third-quarter financial reports in search of beaten-down tech stocks to buy, and some of her picks might surprise you.
So what did she load up on? Wood's exchange-traded funds (ETFs) added to existing stakes in Roku (ROKU 1.58%), Tesla (TSLA 4.96%), and Twilio (TWLO -1.59%). Let's see if we can figure out what she sees in these former highfliers that other investors might be missing.
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Roku
While other investors have left Roku for dead, Wood has been buying the streaming specialist's stock like there's no tomorrow, adding more than 250,000 shares to her various ETFs over the past two weeks alone.
Roku's third-quarter results earlier this month were a mixed bag. The company added 2.3 million active accounts, bringing the total to 65.4 million, up 16%, while streaming hours climbed 21% to 21.9 billion. Revenue increased 12%, while average revenue per user (ARPU) rose 10%.
Streaming video seems to have fallen out of favor with many investors, but there are a couple of catalysts that could turn Roku's fortunes around. Netflix recently introduced its ad-supported streaming tier and Disney+ will be following suit within weeks. This will no doubt bring new viewers into the fold, which will be a win for Roku, which makes the lion's share of its revenue from the advertising that appears on its platform. Furthermore, supply constraints that have limited the supply of connected TVs should be easing, which should energize Roku's viewer growth.
Even though Roku stock has fallen 79% from its high, it's still a core holding for the Ark funds, accounting for over 11.5 million shares worth more than $700 million across three of its ETFs. Roku is the leading gateway to more than 10,000 streaming services and Wood no doubt views its challenges as temporary.
Tesla
Wood made headlines earlier this year when she sold millions of dollars of Tesla stock after shares of the electric vehicle (EV) maker ran up 40% in just two weeks. It wasn't that Wood had lost faith in Tesla; she was just taking advantage of the opportunity to take profits. At the time, the Ark co-founder said, "When we feel like analysts are hyperventilating about a stock -- including Tesla -- we naturally just take profits because we know we're going to get another opportunity associated with controversy to buy the stock lower."
Tesla shares are currently down 52% from their peak, and true to her word, Wood has been buying Tesla shares at a rapid pace, continuing a buying spree that began last month. In all, Ark ETFs have added more than 1.1 million shares of Tesla since late September.
In the third quarter, the EV maker generated revenue that grew 55% year over year, while its net income more than doubled. Some investors became disillusioned, however, when Tesla announced it would likely miss its target for 50% delivery growth this year as a result of supply chain problems and pandemic-related lockdowns in China. Given the circumstances, that's certainly understandable.
Wood remains undeterred. If you have any doubt about Ark's confidence in the company's future, consider this: Tesla is a top five holding in three of Ark's flagship ETFs, owning more than 4.1 million shares worth over $800 million.
Twilio
Ask the average investor and they've likely never heard of Twilio, but its integrated communication software is the industry standard for mobile apps. It facilitates such things as in-app customer service chats and real-time updates for rideshare locations.
For the third quarter, Twilio grew revenue by 33% year over year, and while its loss worsened, it still beat expectations. Investors were less enthusiastic about management's guidance, which forecast year-over-year growth in a range of 18% to 19%, the result of ongoing macroeconomic headwinds.
Yet even with the stock down 83% from its high, Wood continued buying, scooping up more than 850,000 shares in November alone. In fact, over the past six weeks, Wood has added more than 1.2 million shares, bringing the total value of Ark's Twilio holdings to roughly 7.3 million shares worth more than $400 million.
In the wake of the stock's decline, Wood said, "We maintain our long-term conviction in Twilio's potential to power modern enterprise-to-customer communications as global mobile phone adoption increases."
