January was great for Cathie Wood's aggressive growth-investing style. Momentum has cooled in recent weeks for the Ark Invest funds that she helps manage, as the economic climate remains blurry. Will she get back on track?
Ark Invest publishes its daily buy and sell transactions. We know what Wood is selling. We also know what Wood is buying. She added to her existing positions in Tesla (TSLA -3.81%), Cerus (CERS 0.30%), and Robinhood Markets (HOOD -0.41%) on Thursday. Let's take a closer look at her latest moves.
1. Tesla
One of this year's biggest gainers is Tesla Motors. It's a good thing that it's also currently her largest holding across all of Ark Invest's ETFs. The electric car maker more than doubled in just six weeks after bottoming out in early January. The shares are now 16% off their mid-February highs, but Wood obviously feels that the shift to reverse will be temporary.
The stock has rallied despite Tesla unveiling price cuts for its signature vehicles. Tesla's Investor Day presentation earlier this month failed to live up to the hype, but the fast-growing automaker isn't going to slow down anytime soon. It expects to expand its production capacity to the point where it can deliver 85 million shiny new vehicles come 2030.
Image source: Getty Images.
Wood isn't the only believer in Tesla. Billionaire investor George Soros has increased his position in the stock. Despite the stock's hearty year-to-date gains it's still trading for less than half of its peak in late 2021.
The real test now is how Tesla's margins will hold up after slashing its prices. The gross margin on new vehicle sales will probably take a hit, but the head-turning move should also accelerate its market share gains in the otherwise stodgy automotive industry. If more drivers pay up for full-self driving and connectivity features it will be a gamble worth taking on both ends of the income statement.
2. Cerus
With a market cap below $500 million, Cerus is one of the smaller companies in the Ark Invest funds. The stock is also now trading below $3 a share, making it one of the lowest-priced investments on Wood's radar. Cerus is a biotech with a potentially promising system that reduces pathogen loads in different blood components. In a nutshell, the company's Intercept platform is helping to improve blood safety.
Cerus did put out disappointing quarterly results last week. The $44 million in revenue that it reported fell short of the $46 million that analysts were targeting. Cerus also posted a wider-than-expected loss for the quarter. On a brighter note, it also capped off its sixth consecutive year of double-digit revenue growth. The upside is high if it's able to become an industry standard in blood safety. If Cerus can continue to shrink its deficits while growing its business it may not be one of Wood's most obscure holdings for long.
3. Robinhood Markets
The stock chart may suggest otherwise, but Robinhood Markets did a lot of growing up last year. The once trailblazing exchange for stock, options, and crypto traders enhanced its offerings as 2022 played out. It expanded trading hours, introduced a debit card with cash rewards on spending, made it easier to move money around, and even lived up to its promise of retirement planning by rolling out its own IRA with a built-in match feature.
It wasn't enough. Robinhood stock plummeted 54% last year. It's not the only thing that went backwards. Its headcount is a third lower than it was a year earlier. Total net revenue declined 25%, including a 42% plunge in transaction-based revenue. Monthly active users fell from 17.3 million to 11.4 million as 2022 progressed, more than wiping out the gains it achieved in 2021. Assets under custody plummeted 37% to $62 billion.
Things are getting better for Robinhood Markets. It posted positive adjusted EBITDA in its latest quarter. Achieving actual profitability will be a much harder hurdle to clear, but losses are expected to narrow sharply this year as it improves its cost structure. The two founders even eradicated a good chunk of their stock-based compensation.
The shares are heading higher in 2023. Robinhood is likely seeing an uptick in trading activity with stock and even crypto prices moving higher. Robinhood's transformation from a platform for renegade speculators to a more complete fintech stock bears watching, and with the stock still in single digits Wood clearly sees a buying opportunity.
