Cathie Wood as an investor reminds me of the protagonists in the tornado-chasing classic Twister. Wood knows that she's doing something risky with her aggressive style, but she does it for the thrill and ultimately the rewards of learning something new. The co-founder, CEO, and main stock picker of Ark Invest was active in the market windstorm on Wednesday, and thankfully for us, she posts her daily transactions at the end of every trading day.
What are the twisters that she is chasing these days? Wood added to her positions in Twilio (TWLO 2.94%), Palantir (PLTR 3.19%), and Invitae (NVTA 16.13%) on Wednesday. Let's crack open the bulkhead door and see what's out there now that the storm has passed.
Twilio
Shares of Twilio plummeted 13% yesterday after the company posted poorly received financial results, and it isn't a surprise to see Wood buying the dip. It's one of her 15 largest holdings at Ark Invest, and the leading provider of in-app communication solutions has the disruptive business model that Wood enjoys getting behind through thick and thin.
Revenue growth decelerated for the seventh quarter in a row. We've seen the year-over-year top-line gains go from 67% to 15% in that time. This isn't the problem, as the performance was in line with analyst expectations. The other end of the income statement was even better. Adjusted earnings clocked in at $0.47 a share, more than double the $0.21 a share that Wall Street pros were targeting.
Image source: Getty Images.
The sticking point for the market was Twilio's guidance. The $980 million to $990 million that the software services provider is projecting for the current quarter is just 4% to 5% more than it rang up in Q2 of last year. It's also a sequential decline for a business model that doesn't typically experience seasonality between the first and second quarters.
Another problematic nugget is that its dollar-based net expansion rate -- a popular health metric for the software-as-a-service industry -- fell to 106%. It means that existing customers are spending just 6% more over the past year than they were a year ago. Investors like to see this number at 120% or higher, and Twilio was well above that during its days of headier growth.
Palantir
Palantir traded as high as $45 in early 2021, a few months after going public. It's closer to hitting a 52-week high than the other two names on this list, but it still closed in the single digits on Wednesday. Unlike Twilio taking a hit following a rough report, Palantir moved higher this week after impressing the market.
Palantir came through with better-than-expected results on both ends of the income statement. It posted positive net income for the quarter, pointing out that it now expects to remain profitable for every single quarter this year. Shares soared 23% on Tuesday following its healthy financial update. It's not just sinking stocks that Wood likes to chase.
Invitae
Wood is a believer in genetic-testing stocks, even if she's sometimes swimming alone in the gene pool party. Invitae is an established player in medical genetics. It has been consistently posting healthy double-digit and triple-digit revenue growth for eight years. Profitability remains the challenge, and that is why the stock is trading for less than $2 a share right now. Losses have widened in each of the last 10 years.
The business model is working. Quarterly revenue per patient has risen from $416 a year ago to $463 in this week's latest financial update. Year-over-year growth has decelerated sharply, but still rose 10% on a pro forma basis. Invitae also points out that its gross margin and cash burn rate are improving, but analysts see losses continuing for at least these next three years.
Twilio, Palantir, and Invitae have had their challenges, but at their core they continue to be the kind of growth stocks that Wood enjoys owning -- and adding to, if the opportunities arise. In short, she sees them as tornadoes worth chasing instead of avoiding.
