Cathie Wood’s aggressive investing style is starting to regain favor. She won’t stand still. The Ark Invest co-founder, CEO and top stock picker continues to make moves for the exchange-traded funds she helps manage. On Thursday she was busier than usual with her daily transaction overview.
The fund manager increased its existing interests Amazon (NASDAQ: AMZN), MercadoLibre(NASDAQ: MELI)And CRISPR technologies (NASDAQ: CRSP) on Thursday. Is Wood back on track after a tough start to 2024?
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Wood often buys when some of her stocks are taking a step back, but she also isn’t afraid to buy on strength. Amazon shares have risen 13% since the company posted better-than-expected financial results on Halloween. Ark Invest increased its stake on Thursday.
The leading online retailer saw net sales rise 11% in the third quarter, at the high end of previous expectations that called for an 8% to 11% increase year-over-year. A 9% increase in US revenue was boosted by double-digit international growth and Amazon Web Services’ (AWS) booming cloud hosting business. The real story here is that Amazon continues to exceed Wall Street’s profit targets. Earnings per share rose 52% to $1.43. This is the fourth straight report that Amazon has exceeded earnings expectations by at least 18%.
Widening margins can overcome modest sales gains. In a retail environment of rising costs, the ability to milk a greater share of sales resonates with investors. Free cash flow more than doubled this quarter.
The well-received report provides a welcome contrast to the poorly received second-quarter results three months earlier. That update brought another profit decline, but the market was not happy with the revenue miss from single-digit e-commerce growth, both here and abroad. Amazon’s guidance wasn’t particularly attractive either.
Amazon’s new guidance calls for net sales growth of 7% to 11% for the seasonally strong holiday quarter. This is actually lower than the guidance it provided for the third quarter, but investors saw how it managed to reach the top end of that range. Operating income should continue to grow even faster.
Shares of MercadoLibre fell 16% on Thursday after the company posted disappointing financial results. Sales increased by 35% in US dollars, in line with expectations. However, the only 11% increase in operating profit was a rare miss for the Latin American e-commerce and fintech giant.
MercadoLibre has been able to leverage the success of its e-commerce platform to support neighboring businesses. Some investors may argue that fintech solution Mercado Pago is the real star here. The stock was trading near its all-time high in September just before the report, but Wood appears to have viewed the stock’s selloff as a buying opportunity. MercadoLibre has a history of rewarding investors who buy on dips.
Wood is a fan of the potential of gene editing as a way to combat genetic diseases. She added to CRISPR on Thursday, two days after the company posted mixed quarterly results. CRISPR, one of the leading gene editing stocks, is working on clinical trials in oncology, autoimmune diseases, diabetes and cardiovascular solutions.
The new financial figures are not as important as you might think. Coming up short on the top line but coming in with a smaller loss than expected is no problem. CRISPR is still in the early stages of the lengthy regulatory approval process. The country has a cash-rich balance sheet, so time is a factor. A few analysts lowered their price targets for the stock. They have a neutral rating on the stock and may sit on the sidelines until the path to revenue generation and profitability becomes clearer. Fortunately, time is also on Wood’s side.
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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 positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Amazon, CRISPR Therapeutics, and MercadoLibre. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool
