It's not easy being Cathie Wood these days. The Ark Invest co-founder, CEO, and top stock picker has fallen on hard times since turning heads with triple-digit returns in 2020 for her family of high-growth exchange-traded funds. Her largest fund hit a five-year low on Tuesday.
She's not standing still. Ark Invest publishes its transactions daily, and investors know the stocks she's now buying. Wood added to her stakes in Tesla (TSLA -3.76%), Roku (ROKU -0.32%), and Teladoc Health (TDOC 0.70%) on Tuesday. Let's take a closer look inside her latest purchases.
Image source: Getty Images.
Tesla
Tesla had been the largest holding across Ark Invest's family of funds until the electric vehicle maker's recent slide. It's now Wood's third-largest holding, and she's been buying the dip. She added to her Tesla position on Tuesday. It may have been one of her rare gainers in 2021 as many of her core growth stocks were tumbling, but the slide has been brutal this year.
The stock is down 61% in 2022 through Tuesday's close. There's no shortage of reasons to blame for the market's displeasure in Tesla as an investment. The fear of a looming recession is keeping consumers away from big-ticket purchases. The spike in inflation is boosting interest rates, making it more costly to finance a Tesla purchase. Major automakers are finally starting to crank out electric vehicles, giving shoppers more options at lower price points. Gasoline prices have also fallen sharply since peaking in June, making traditional cars more compelling again.
There are also some Tesla-specific reasons for the slide. Investors weren't happy to see rising inventory levels and gross margin contracting in Tesla's latest quarter. It's also facing problems in China, which at one point seemed like its most promising international opportunity. We also can't ignore that Elon Musk spending so much time on Twitter since leading a group of investors in acquiring the social media platform is a problem. It's distracting at best, and at worst his polarizing posts are scaring away more than just Twitter advertisers concerned about brand safety. Musk and fellow investors spent $44 billion for Twitter. Since the deal closed on Oct. 27 Tesla's market cap has fallen by more than $275 billion, or 39%.
Roku
If you think Tesla has had a rough year, Roku is saying, "hold my remote." The pioneer of video streaming on TV has seen its stock plummet 81% this year. Drag the starting line all the way to last year's summertime high and the shares are down 91%.
The reasons for the fall are as clear as your high-def screen. The once-profitable Roku is now losing a lot of money as it subsidizes its hardware devices and builds out a content library of original content. It's also feeling the sting of the connected TV ad market, as marketers are paring back their budgets with consumers being more cautious with their money. After years of healthy double-digit growth, Roku's guidance calls for a sequential decline in revenue -- and only a 3% year-over-year advance -- for the current quarter.
The good news here the platform is still engaging its audience. There were a record 63.1 million active viewers on Roku at the end of September, a 14% gain over the past year. They are averaging more time streaming on Roku than they were a year ago. Average revenue per user also hit a new all-time high in the third quarter, but guidance suggests the company will see the first dip on that front in years.
The cash-rich balance sheet should see Roku through this rough patch. It now trades at a historically low revenue multiple of 1.5 times its enterprise value.
Teladoc
Telehealth was one of the many emerging industries that stepped up during the early days of the COVID-19 crisis. When people couldn't visit their doctor, mental health therapist, or other specialist for a medical consultation in person, they turned to videoconferencing with a trained medical pro. Teladoc is a leader in this field.
Like Tesla and Roku, 2022 hasn't exactly been Teladoc's year. The shares have fallen 72% this year, and are off a blistering 92% since peaking early last year. Growth has slowed considerably for Teladoc, and it recently posted its sixth consecutive quarter of decelerating year-over-year top-line gains.
The opportunity here is that people are still leaning on Teladoc. Revenue rose 17% in the third quarter, up a respectable 20% through the first nine months of this year. Losses continue, and it did take a huge $3 billion noncash goodwill write-down earlier this year to adjust the value of its costly Livongo acquisition. The net deficit did narrow in its latest quarter. If Teladoc is finally taking baby steps in the direction of profitability it would be a much brighter diagnosis for this out-of-favor but still growing medical health specialist.
Tesla, Roku, and Teladoc are all trading well below their highs, but they're all still compelling growth stocks at attractive price points. Wood apparently believes in them right now.
