Cathie Wood is trouncing the market in 2023. Her aggressive style of growth investing is back in fashion, and she's on track after back-to-back years of disappointing returns following her head-turning blowout performance in 2020.
What is she buying these days? Wood kicked off the new trading week by adding to her existing stakes in Toast (TOST 3.42%), Twilio (TWLO 1.47%), and SoFi Technologies (SOFI 3.69%) on Monday. Let's take a closer look.
Toast
Fears that folks are eating out less weighed on Toast after it posted disappointing financial results last month, and Wood has been coming back for seconds ever since. Monday was the fifth time that the Ark Invest founder, CEO, and money manager bought more shares of the provider of point-of-sale solutions for the restaurant industry since its poorly received third-quarter report on Nov. 7.
Toast is still growing. Revenue soared 34% in its latest quarter, but that matched the growth in the number of eatery locations on the platform. Transactions revenue per location was flat year over year. The dagger was its guidance, with Toast warning that transactions per outlet on its platform were trending lower in the new quarter. It also sees adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) contracting sharply sequentially for the fourth quarter.
Image source: Getty Images.
Are the fears warranted? Toast does more than just process eatery payments with its now ubiquitous credit card readers. It's a one-stop shop for indie restaurants and small chains. Once you trust Toast to settle up with your customers, it's easy to also lean on the platform to help you run your inventory checks, manage your takeout orders, and build out a loyalty marketing program. The rub, of course, is that all these segments suffer if hungry consumers are saving money by eating at home.
Investors can be a finicky lot. Despite many growth stocks rallying in recent weeks, Toast shares haven't recovered since their early November sell-off. Toast stock is still 12% below where it was when it delivered its problematic financial update four weeks ago. In a year of rising growth stocks, Toast is trading 16% lower year to date. Wood apparently sees this as a dinner bell.
Twilio
There's a lot of power in that smartphone you're holding, and Twilio is a big reason for the device's functionality. Twilio is a leading provider of in-app communication solutions, helping more than 300,000 active developers serve their users without having to leave their apps. Is your takeout delivery driver close? Do you need to check real-time availability of the beach condo you want to book for your next tropical getaway? Twilio makes good apps better.
Business has slowed at Twilio, largely because it's a volume-based business and some of its biggest markets have come under fire. Revenue growth has decelerated for nine straight quarters, going from a 67% top-line jump more than two years ago to just 5% in its latest frame. The good news is that it's making some serious headway on improving its bottom line. Adjusted earnings more than doubled in its latest report. Twilio's profit has trounced expectations over the past year, even as its revenue gains continue to slow. The stock is still beating the market with a 37% gain in 2023. The shares can move even higher if revenue gains start accelerating again.
SoFi Technologies
The biggest gainer of the three stocks on this list is SoFi. Shares of the fintech provider have soared 73% this year, but the stock has corrected sharply since peaking this summer. Its last financial update was strong. It topped Wall Street pro forecasts on both ends of the income statement.
Business keeps growing. Its member base of 6.9 million at the end of September is a 47% increase over the past year. SoFi has posted 10 straight quarters of record adjusted net revenue. The fear here is the impact that a potentially weak economy can do its business. The stock's huge upticks earlier this year also make it vulnerable, but at the end of the day, growth conquers all. It's something that Wood naturally believes in, especially given her tendency to buy fast-growing companies when they run into sentiment speed bumps.
