Oh, what A difference a year makes. Cathie Wood stocks in 2023 are doing so much better than the disaster in 2022. While that doesn’t mean the innovation investor has gotten all her losses back from the tech winter, things are looking much better.
Wood’s top three ETFs by assets are the ARK Innovation ETF (NYSEARCA:ARKK), ARK Genomic Revolution ETF (BATS:ARKG), and the ARK Next Generation ETF (NYSEARCA:ARKW).
In 2022, they averaged a total return of -62.8%. So far, in 2023, the average is 24.9%, 87.7% better through the first three months of the year. Only now are her funds returning to positive territory for the 5-year annualized total return.
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The portfolio manager blames the Federal Reserve for her terrible results in 2022. Eight rate hikes over a year aren’t very helpful to tech-focused portfolios like those held by Ark Invest, her ETF firm.
Wood has argued for some time that the interest rate hikes would cause a recession. However, economists now put the odds of a downturn in the next 12 months at 65%, up from 60% a month ago.
She’s paid to weather these storms. Where she’ll benefit is when interest rates reverse course. While that might not happen until 2024, Wood will keep making investment bets.
Here are three Cathie Wood stocks for your April buy lists—one from each fund.
Cathie Wood Stocks: Tesla (TSLA)
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There is no more prominent Tesla (NASDAQ:TSLA) supporter than Cathie Wood. It is the largest holding of Ark Innovation, her largest fund, with a 10.37% weighting.
Wood, who’s not afraid to make Tesla price predictions, said in early February that she sees TSLA stock hitting $1,500 by 2026. Asked what stock she would hold for the next decade if she could only buy one; Tesla was her answer. The portfolio manager especially liked Elon Musk’s price cuts in China, Europe, and the U.S. It lit a fire under flagging Tesla sales.
In 2022, electric vehicle (EV) sales in the U.S. accounted for 5.8% of all vehicle sales, 270 basis points higher than in 2021, with Tesla accounting for 65% of those EV sales. In addition, the EV tax credit (up to a maximum of $7,500) expansion as part of the Biden administration’s Inflation Reduction Act (IRA) will help Tesla fend off the many competitors.
Tesla reported record first-quarter delivery and production numbers on April 2. It delivered 422,875 in the first quarter, nearly 3,000 higher than the analyst estimate. In addition, it produced 440,808 in Q1 2023, which was also better than expected. On a positive note, the spread between vehicles produced and delivered was 17,933 in the first quarter, down from 34,423 in Q4 2022.
As pure-play EV companies go, no one is stronger at the moment.
Roku (ROKU)
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I went with Roku (NASDAQ:ROKU), the second-largest holding of ARKW at 7.55%, behind only Coinbase Global (NASDAQ:COIN) at 8.27%. I’m not interested in anything cryptocurrency-related at the moment. But, of course, Wood’s got a lot more investing experience. Plus, she’s a lot more comfortable with risk.
Roku isn’t risk-free but has recovered some 2022 losses, up more than 58% year-to-date.
On March 27, Susquehanna Financial analyst Shyam Patil upgraded ROKU stock to Positive from Neutral with a $75 target price, 17% above where it’s currently trading.
“Long-term drivers remain in play, while near-term business fundamentals appear to be bottoming,” Barron’s reported Patil’s comments in a note to clients. “Despite near-term noise, we believe the long-term connected TV opportunity remains intact and continue to see Roku as a prime beneficiary of the secular shift of linear budgets.”
The company is likely to benefit as advertisers continue to move advertising from linear TV to connected TV platforms such as Roku.
On March 30, Wood bought an additional 65,000 shares of Roku stock. That’s a very good sign.
Exact Sciences (EXAS)
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Exact Sciences(NASDAQ:EXAS) is the largest holding of ARKG with an11.23% weighting. When I last wrote about the company behind the Cologuard cancer detection diagnostic test in October, it was6.77%of ARKG. So Wood has gotten genuinely excited about its business.
“Analysts love this stock. Of the 20 that cover it, 18 rate it a Buy or Overweight, with an average target price of $70.06. That’s more than double where it’s currently trading,” I wrote on Oct. 3.
“Down more than 60% YTD, it trades at 3.09x sales, about one-quarter of its five-year average. If you don’t mind investing in companies that lose money, you couldn’t get behind a better cause.”
In 2022, its revenue was$2.08 billion, 25% higher, excluding its Covid-19 testing. As a result, while it had a net loss of $624 million in 2022, it generated an EBITDA profit of nearly $5 million in Q4 2022, up considerably from a $115 million adjusted EBITDA loss in Q4 2021.
Since the beginning of October, EXAS has nearly doubled, yet it still trades well below its five-year averageprice-to-sales ratio. As for analysts, of the21who cover it, 15 rate it Overweight or Buy with an average target price of $76.24, 18% below where it’s currently trading.
It’s getting closer to profitability every quarter. So I can see why Wood has upped ARKG’s position.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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