The hottest person in the usually quiet world of exchange-traded funds is Cathie Wood. Her ARK Invest actively managed ETFs have been a pioneering force in the industry, and the fact that they all doubled in price in 2020 was a huge selling point.
Wood is constantly buying and selling stocks for her five main active ETFs. However, three companies in particular really stood out last week, given the size and persistence of Wood's purchasing activity. Let's look at these companies and see whether they look like solid picks right now.
1. Palantir Technologies
Palantir Technologies (NYSE: PLTR) was a big buy from Wood last week. Her flagship ARK Innovation ETF (NYSEMKT: ARKK) bought more than 5.27 million shares of the data analytics specialist's stock on Feb. 18, making up about half a percent of the ETF's total holdings. That followed a Feb. 16 purchase of 1.56 million shares for the ARK Next-Generation Internet ETF (NYSEMKT: ARKW), representing roughly the same 0.5% buy. That adds up to almost $200 million in purchases.
The big Feb. 18 buy came immediately after Palantir reported its quarterly financials, which sent the stock sharply lower and gave Wood a bargain entry point. Some investors were nervous that although Palantir's revenue jumped 40% year over year, it contained to lose money at a higher rate than most had anticipated. Yet as with many young companies, Palantir had a lot of stock-based compensation to weigh on its bottom line. Back that out, and there were encouraging things to see, including improving margins and considerable growth in its nongovernment private-sector business.
I'd anticipate that Wood will continue to add to positions in Palantir at opportunistic moments. It's one of ARK Innovation's smallest positions, but that could change quickly based on her past practice.
Tesla (NASDAQ: TSLA) has been the driving force behind Wood's success over the past year, and the electric-vehicle maker's stock is a top holding across several ARK Invest ETFs. Wood remains optimistic about the Elon Musk-led company's future success.
Specifically, Wood bought a total of nearly 162,000 shares for ARK Innovation on Feb. 17 and Feb. 19, spending almost half a percent of assets. She bought a bit over 29,500 shares for ARK Next-Generation Internet and almost 13,200 shares for ARK Autonomous Technology & Robotics (NYSEMKT: ARKQ), working out to roughly 0.25% of assets for both funds. All told, she likely spent around $160 million to bring holdings of Tesla in those three ETFs to between 8% and 10% each.
Wood likes Tesla not just for its fast-growing dominant EV franchise but also for adjacent opportunities in areas like autonomous driving, artificial intelligence, and battery technology. Last week, she mentioned ride-sharing as a potential use for Tesla vehicles as well. Wood isn't giving up on the horse that helped her win the race in 2020, and many investors also remain optimistic on the stock's prospects.
Finally, AbbVie (NYSE: ABBV) was a big favorite for the ARK Genomic Revolution ETF (NYSEMKT: ARKG). Wood made successive purchases of 122,000, 295,000, and 186,000 shares on Feb. 16, 17, and 18, adding up to about 0.5% of the ETF's assets. The genomics ETF is smaller than its peers, so that amounted to spending of around $60 million.
Two of ARK Invest's big ideas for 2021 involve multi-cancer screening and second-generation cell and gene therapies. Many of the companies held by the genomics ETF are newer players in the field, such as top holding Teladoc Health (NYSE: TDOC). However, AbbVie has a massive pipeline of candidate treatments along with a solid balance sheet for potential acquisitions and strategic partnerships. Wood apparently believes that AbbVie is well-positioned to take advantage of what she sees as groundbreaking trends in the healthcare space.
Don't take your eyes off Cathie Wood's stock picks
With so many investors watching Cathie Wood's investment moves in her red-hot actively managed ETFs, it's essential to know the big moves she's making. Her opinions carry a huge amount of weight, and she can serve as a useful source of ideas if you're looking for stocks to add to your portfolio.
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