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Cathie Wood’s 10 Stock Picks for the Next 5 Years

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·9 min read
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In this article, we discuss Cathie Wood's 10 stock picks for the next 5 years. If you want to read about some more stocks in Wood's portfolio, go directly to Cathie Wood's 5 Stock Picks for the Next 5 Years.

Cathie Wood of ARK Investment Management was one of the most successful investors of the pandemic years. Her flagship ARK Innovation ETF returned more than 152% to investors in 2020 and continued to climb as the pandemic waned in 2021. However, towards the backend of last year and throughout 2022, this growth-focused fund has tanked by over 50%, losing around $13 billion in value. Wood, who is criticized for her “disruptive innovation” investment strategy, has refused to back down, instead doubling down on her growth bets during this period.

ARK Continues to Attract Investors Despite Losses

Between October and December 2021, ARK Investment Management lost over $8 billion in value. Her innovation ETF is now down almost 63% from a high in February 2021. Despite this shock, investors continued to pour money into the fund. According to data compiled by fintech advisor Lipper, Wood has attracted inflows of over $2 billion in the past few months even as the broader growth market slumps amid rising interest rates. Wood has described her portfolio as one of “deep value” that would bear fruits in the coming five years.

Some of the top stocks that Wood was bullish on at the end of the fourth quarter of 2021 included Twitter, Inc. (NYSE:TWTR), CRISPR Therapeutics AG (NASDAQ:CRSP), and Invitae Corporation (NYSE:NVTA), among others discussed in detail below.

Our Methodology

The stocks were picked from the fourth quarter regulatory filings of ARK Investment Management. The companies in which the fund has held a stake for the past five years were selected for the list.

Data from around 900 elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.

Cathie Wood's 10 Stock Picks for the Next 5 Years
Cathie Wood's 10 Stock Picks for the Next 5 Years

Cathie Wood of ARK Investment Management

Cathie Wood's Stock Picks for the Next 5 Years

10. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 91

Tesla, Inc. (NASDAQ:TSLA) markets electric vehicles and clean energy solutions. Hedge funds have been piling into the stock in recent months. At the end of the fourth quarter of 2021, 91 hedge funds in the database of Insider Monkey held stakes worth $12.9 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 60 in the previous quarter worth $10.6 billion.

Latest data shows that ARK owned 1.9 million shares of Tesla, Inc. (NASDAQ:TSLA) at the end of the fourth quarter of 2021 worth more than $2 million, representing 6.15% of the portfolio. The company has been in the ARK portfolio, with a small gap in 2017, since the fourth quarter of 2016.

Just like Twitter, Inc. (NYSE:TWTR), CRISPR Therapeutics AG (NASDAQ:CRSP), and Invitae Corporation (NYSE:NVTA), Tesla, Inc. (NASDAQ:TSLA) is one of the stocks that is on the radar of elite growth investors.

Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2021 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. Tesla, Inc. (NASDAQ:TSLA) stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”

9. Teladoc Health, Inc. (NYSE:TDOC)

Number of Hedge Fund Holders: 39

Teladoc Health, Inc. (NYSE:TDOC) provides virtual healthcare services. Securities filings show that ARK owned 18.9 million shares of Teladoc Health, Inc. (NYSE:TDOC) at the end of December 2021 worth $1.7 billion, representing 5.25% of the portfolio. The company has been in the ARK portfolio since the first quarter of 2018.

Teladoc Health, Inc. (NYSE:TDOC) remains a top virtual health stock on Wall Street. At the end of the fourth quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in Teladoc Health, Inc. (NYSE:TDOC), compared to 40 in the previous quarter worth $2.8 billion.

In its Q4 2020 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Teladoc Health, Inc. (NYSE:TDOC) was one of them. Here is what the fund said:

“Teladoc Health, Inc. (NYSE:TDOC) offers remote physician access to patients at home. After experiencing incredible levels of growth throughout the early stages of the pandemic as its unique value proposition rose to the forefront of the healthcare industry, the firm’s shares cooled off a bit as optimistic vaccine data slightly curtailed investor expectations for the firm’s future growth potential. We sold Teladoc Health, Inc. (NYSE:TDOC).”

8. Twilio Inc. (NYSE:TWLO)

Number of Hedge Fund Holders: 80

Twilio Inc. (NYSE:TWLO) owns and runs a cloud communications platform. Elite hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, California-based investment firm SCGE Management is a leading shareholder in Twilio Inc. (NYSE: TWLO), with 2 million shares worth more than $539 million.

Regulatory filings reveal that ARK owned 4 million shares of Twilio Inc. (NYSE:TWLO) at the end of the fourth quarter of 2021 worth $1 billion, representing 3.23% of the portfolio. The company has been in the ARK portfolio, excluding minor absences in 2017 and 2018, since the fourth quarter of 2016.

In its Q3 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Twilio Inc. (NYSE:TWLO) was one of them. Here is what the fund said:

“Twilio Inc. (NYSE:TWLO) shares were also a top detractor for the quarter. Just like after 1Q, despite another quarterly beat in 2Q, management guidance–which we believe to be conservative–disappointed some investors. Second quarter revenue of $669 million was up 67% year over year, significantly exceeding management’s guidance of 47%-50% revenue growth. Management guided 3Q21 revenue to 50%-52% revenue growth, which was ahead of expectations, but due to continued investment also guided to a non-GAAP operating loss of $25 million-$30 million, which was below the Street’s forecast of a $12 million loss.

The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”

7. Block, Inc. (NYSE:SQ)

Number of Hedge Fund Holders: 96

Block, Inc. (NYSE:SQ) provides payments services. Latest 13F filings show that ARK owned over 6.1 million shares of Block, Inc. (NYSE:SQ) at the end of December 2021 worth $997 million, representing 3.01% of the portfolio. The firm has been in the ARK portfolio since the fourth quarter of 2016.

Block, Inc. (NYSE:SQ) is a favorite payments stock in the finance world. At the end of the fourth quarter of 2021, 96 hedge funds in the database of Insider Monkey held stakes worth $5.9 billion in Block, Inc. (NYSE:SQ), compared to 98 in the preceding quarter worth $8.8 billion.

In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Block, Inc. (NYSE:SQ) was one of them. Here is what the fund said:

“We established a position in leading Financial Technology provider Block, Inc. (NYSE:SQ) during the quarter. Through one integrated system, Block, Inc. (NYSE:SQ) is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).

The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that Block, Inc. (NYSE:SQ) has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.

We estimate that Block, Inc. (NYSE:SQ) can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of the company’s future value will be from its Cash App business.”

6. Intellia Therapeutics, Inc. (NASDAQ:NTLA)

Number of Hedge Fund Holders: 31

Intellia Therapeutics, Inc. (NASDAQ:NTLA) operates as a genome editing firm. Major hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Intellia Therapeutics, Inc. (NASDAQ:NTLA), with 1.5 million shares worth more than $186 million.

Latest 13F filings show that ARK owned 7.9 shares of Intellia Therapeutics, Inc. (NASDAQ:NTLA) at the end of December 2021 worth $936 million, representing 2.82% of the portfolio of the fund. The firm has been in the ARK portfolio since the fourth quarter of 2016.

In addition to Twitter, Inc. (NYSE:TWTR), CRISPR Therapeutics AG (NASDAQ:CRSP), and Invitae Corporation (NYSE:NVTA), Intellia Therapeutics, Inc. (NASDAQ:NTLA) is one of the stocks that institutional investors are buying.

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Disclosure: None. Cathie Wood's 10 Stock Picks for the Next 5 Years is originally published on Insider Monkey.