Cathie Wood's ARK Fund Has 40% of the Portfolio in 5 Sizzling 'Strong Buy' Stocks

Investing

Published: July 24, 2023 7:27 am

Last Updated: July 24, 2023 9:50 am

What a difference a year makes. After exploding higher from March 2020, right at the beginning of the COVID-19 pandemic, until February 2021 (when the ARK Innovation fund printed an all-time high), Cathie Wood’s exchange-traded fund soared a stunning 313% and attracted billions of dollars of new capital. Wood was hailed as a genius as she took big positions in companies that had very promising potential. Yet, after the parabolic run, trouble started brewing. In 16 short months, between February 2021 and June 2022, all the huge gains were given back, and the fast money was seemingly out the door when the fund finally bottomed in December 2022.
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Wood, whose mentor Art Laffer worked in the Reagan administration and was her professor at the University of Southern California, has said she stuck to her guns and her strategy of having a horizon of “forever,” and things are starting to look bright again for investors. While always a vehicle for the aggressive growth crowd and not really intended for conservative investors, since hitting the low in late 2022, the fund took off with the 2023 artificial intelligence tech rally and is up a stunning 54% from the lows.

Not unlike Warren Buffett, Wood’s ARK Innovation fund has a concentrated portfolio, with 9.2 billion in assets with only 31 holdings. The top five stocks make up 40% of the fund. We screened those top stocks, all of which are highly regarded on Wall Street and rated Buy, and they make sense for investors via the fund or individually.

While all five of the following stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Tesla

The electric vehicle giant led by Elon Musk continues to be by far the biggest position in the ARK Innovation fund. Tesla Inc. (NASDAQ: TSLA) designs, develops, manufactures, leases and sells electric vehicles and energy generation and storage systems in the United States, China and elsewhere.

Its Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. It offers non-warranty after-sales vehicles, used vehicles, retail merchandise and vehicle insurance services. This segment also provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; purchase financing and leasing services; services for electric vehicles through its company-owned service locations and Tesla mobile service technicians; and vehicle limited warranties and extended service plans.

The Energy Generation and Storage segment engages in the design, manufacture, installation, sale and leasing of solar energy generation and energy storage products and related services to residential, commercial and industrial customers and utilities through its website, stores and galleries, as well as through a network of channel partners. It offers provision of service and repairs to its energy product customers, including under warranty, as well as various financing options to its solar customers.

Wedbush’s $350 target price on Tesla stock is a Wall Street high. The consensus target of $230.18 is below Friday’s closing share price of $260.02.

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Coinbase

This pure play on cryptocurrency is the fund’s second-largest holding and likely will be another long-term hold. Coinbase Global Inc. (NASDAQ: COIN) provides financial infrastructure and technology for the crypto economy globally.
Coinbase offers the primary financial account in the crypto economy for consumers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
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While Wood recently took some profits in the stock, she remained very positive on the shares and noted that the court ruling for Ripple against the Securities and Exchange Commission was positive for Coinbase and the industry.

Compass Point has a $140 target price, and Coinbase Global stock has a consensus target well below Friday’s close at $100.82.

Roku

Over-the-top streaming for entertainment and other content is huge, and this stock is a solid way to play it, as well as the third largest holding in the portfolio. Roku Inc. (NASDAQ: ROKU) operates a TV streaming platform that allows users to find and access TV shows, movies, news, sports and more.

The company also provides digital advertising and related services, including the demand-side ad platform and content distribution services, such as subscription and transaction revenue shares; media and entertainment promotional spending services; premium subscription services; video and display advertising services; and branded channel buttons on remote controls of streaming devices.

In addition, Roku offers billing services and brand sponsorship and promotions. It manufactures, sells and licenses smart TVs under the Roku TV name. The company provides streaming players, audio products and smart home products and accessories under the Roku brand name. It offers its products and services through retailers and distributors, as well as directly to customers through its website, in North America, the United Kingdom, Brazil and Germany.

The BofA Securities target price is $86, while the consensus target is just $68.65. Roku stock ended Friday’s session at $73.50.

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Zoom Video Communications

A huge pandemic winner that has come in sharply is still the standard for an industry that likely continues to grow as more people work from home. Zoom Video Communications Inc (NASDAQ: ZM) provides a unified communications platform in the Americas, the Asia Pacific, Europe and elsewhere.

The company’s offerings include the following:

Zoom Meetings include HD video, voice, chat and content sharing through mobile devices, desktops, laptops, telephones and conference room systems.
Zoom Phone is an enterprise cloud phone system.
Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet and mobile devices.
Zoom Rooms is a software-based conference room system.
Zoom Hardware-as-a-Service allows users to access video communication technology from third-party equipment.
Zoom Conference Room Connector is a gateway for SIP/H.323 endpoints to join Zoom meetings.
Zoom Events enables users to manage and host internal and external virtual events.

OnZoom is a prosumer-focused virtual event platform and marketplace for Zoom users to create, host and monetize online events.
Zoom Webinars provide video presentations to large audiences from many devices.
Zoom Developer Platform enables developers, platform integrators, service providers and customers to build apps and integrations using Zoom’s video-based communications solutions, as well as integrate Zoom’s technology into their products and services.
Zoom App Marketplace helps developers to publish their apps, as well as third-party integrations of Zoom.
Zoom Contact Center is an omnichannel contact center solution.

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Zoom Communications stock has a consensus price target of $83.49, and the most recent close was at $71.03.

Block

Led by Twitter founder Jack Dorsey, this is one of the premier fintech payment companies in the world. Block Inc. (NYSE: SQ) creates tools that enable sellers to accept card payments and provides reporting and analytics, as well as next-day settlement.