Cathie Wood has been trying to get back on track since 2020’s blowout that made her one of the most followed growth stock investors in the country. It hasn’t been easy for the co-founder, CEO and investor of Ark Invest. Its exchange-traded funds have tracked the market poorly over the past two years, and will fall sharply short in 2024.
Her most popular fund is trading down 16% year to date, but she’s not going down without a fight. She started the new trading week on Monday with several portfolio changes. She expanded existing functions Amazon.com (NASDAQ: AMZN), Palantir (NYSE:PLTR)And PagerDuty (NYSE:PD) this week. Let’s take a closer look at that.
1. Amazon
The leading online retailer doesn’t have the torrid growth story of its first two decades of public trading. The company has posted positive net sales every year since going public in 1997, but the 9% growth it posted in 2022 and the 12% sales gain it posted last year are the weakest two years in its 27 years. it is on the market.
Amazon CEO Andy Jassy is trying to make the most of this phase of the e-commerce company’s life cycle. He improves Amazon’s efficiency by cutting costs and finding ways to use AI to increase engagement. It functions. Net sales rose by a modest 13% in the first quarter of this year, but operating profit more than tripled.
Amazon is still a beast, even in this low-growth environment. It has generated $48.8 billion in free cash flow over the past four quarters. However, it is unwilling to return some of that money to its shareholders in the form of distributions. It is the largest company in the country by market capitalization and currently has no dividend policy.
But the investors will be fine. They’re here for capital growth and the shares are up 47% in the last year.
There are challenges for Amazon to differentiate itself in a more competitive market than in the past. Physical chains are becoming increasingly better at achieving digital sales. There is also a surge in popularity of Chinese e-commerce platforms offering ridiculously low prices. Net product sales increased by only 7% in the first quarter. It was strong in its Amazon Web Services (AWS) cloud hosting behemoth and other services that drove results to double-digit growth.
Amazon is one of Ark Invest’s smallest holdings, and that’s a shame. The stock is beating the market this year, and it could have helped move the needle if Wood had a bigger stake in the popular e-tailer.
2. Palantir
Not all of Ark Invest’s largest holdings are in the red. Palantir, one of Wood’s 10 largest combined holdings, is beating the market this year. The provider of software tools for the intelligence community has also almost quadrupled since the beginning of last year.
The market is still catching up to Palantir’s potential. The stock rose 6% on Monday after Argus analyst Joseph Bonner initiated coverage with a buy rating. He thinks Palantir’s move into the commercial sector beyond its roots and serving the public sector increases the company’s advantage. Commercial sales rose 40% in the latest quarter, roughly double the 21% increase in total sales over the period.
Bonner thinks Palantir’s earnings power and cash flow will increase significantly this year, but this doesn’t make the stock cheap. Palantir’s trades for 76 times this year’s analyst earnings target and a still-rich multiple of 63 as we look to next year.
3. PagerDuty
Finally we come to a name that has been discontinued this year. The provider of cloud-based business analytics and uptime monitoring is trading 8% lower in 2024.
Revenue growth has slowed for seven quarters in a row, from 34% to 8% in that time. But sentiment is starting to turn positive. The stock is up nearly 20% since last month’s low, and even got an analyst upgrade last week. Yes, PagerDuty is still trading lower this year, but it was much worse a month ago. And analysts see revenue growth accelerating for the rest of this year.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, PagerDuty, and Palantir Technologies. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
