Cathie Wood’s investment style is starting to show signs of life. Some of the exchange-traded funds she helps run as co-founder, CEO and investment manager of Ark Invest are finally posting positive gains this year. For now, it is still behind the market in 2024.
But Wood continues to expand her existing positions. She bought shares Shopify (NYSE: STORE), Metaplatforms (NASDAQ: META)And Coin base (NASDAQ: MINT) on Monday. Let’s take a closer look at her latest purchases.
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Shopify shares are up 62% since bottoming this summer, but the company is only now moving toward delivering positive returns this year. It’s a long way back for the popular e-commerce platform that offers budding entrepreneurs and established brands an easy way to set up a digital store. And it’s no surprise that Shopify’s resurgence mirrors the turnaround for Ark Invest. Shopify is Wood’s largest combined holding of all funds.
Shopify won’t report new financial figures until it announces third-quarter results next week. But momentum has been strong since well-received second-quarter results in early August.
Sales for Shopify rose 21% in the second quarter. That’s the weakest year-over-year revenue growth for the white-label e-commerce services provider in two years. However, Shopify was only modeling that its business would grow at a high-teens rate in the May quarter. The company also no longer has the logistics activities it recently offloaded. On an apples-to-apples basis, sales would have increased 24% to 25%.
The end result was even better. Shopify returned to profitability and free cash flow more than tripled. Shopify has easily exceeded analyst profit targets over the past year, but that hasn’t always been enough. The stock tumbled in May after Shopify offered weak guidance that it was able to overcome three months later. That wasn’t a problem this time.
Shopify not only exceeded the predictions of Wall Street professionals on both sides of the income statement. Shopify sees growth accelerating in the quarter it will achieve on November 12. Expectations are high given the stock’s roiling share price since its last financial update, but Wood thinks it can live up to the hype. There’s a reason why she’s expanding her role now instead of waiting a week to see how reality plays out for the top e-commerce company.
Wood follows a different playbook for Meta. The parent company of Facebook, Instagram and WhatsApp announced its third-quarter results last week. It was a solid beat, but the stock dropped on Halloween as tricks were thrown along with the treats.
Meta also offered problematic guidance, warning of rising spending costs. However, let’s get back to the treats. Meta’s reach is enormous, with 3.29 billion daily active users on its platforms. That’s a modest 5% increase over the past year, but the monetization opportunities continue to improve. Revenue rose a better-than-modeled 19%, and earnings per share rose nearly twice as fast with a 37% jump.
There is an opportunity in the market’s short-term concerns. Revenue growth slowed after five consecutive quarters of sequential acceleration, but is growing at a rapid pace that justifies the multiple of 22 times forward earnings.
This has been a good year for crypto investors. Bitcoin (CRYPTO: BTC) is up more than 60% this year, but the big gains are not reflected on the largest cryptocurrency trading platform as Coinbase shares are up just 7% in 2024. Bitcoin accounts for 37% of trading volume on Coinbase, but some crypto denominations have done even better.
Investors should not complain. Coinbase is still up more than fivefold since its inception last year. Coinbase reported quarterly financials on the same day as Meta and posted even stronger growth. Turnover almost doubled, but operating profit struggled. Coinbase reversed its small net loss a year earlier, but adjusted net income has fallen short in back-to-back reports.
Wood is a big supporter of crypto in general and Bitcoin in particular, and Coinbase remains one of her favorite ways to cash in on the digital currency wave.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Rick Munarriz has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Meta Platforms and Shopify. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
