3 Best Cathie Wood Stocks to Buy Now
Despite the huge pullback by stocks, investors can’t help but look for the best Cathie Wood stocks to buy. There is just something about the ARK Innovation ETF (NYSEARCA:ARKK) that keeps drawing investors back in.
That’s probably because Wood gained notoriety for her big bet on Tesla (NASDAQ:TSLA), which has now paid off handsomely. And her flagship ETF — ARKK — soared after the pandemic, as investors piled into work-from-home and technology stocks.
The fund ballooned higher and at its high, was up 383% from its pandemic low. For perspective, that more than tripled the return of the S&P 500 during the same time frame.
Now that the bear market has struck, though, most of the ARKK stocks are down by 50% or more. Many are down by 70% to 75%. That got us wondering: What are the best Cathie Wood stocks right now?
Best Cathie Wood Stocks: Tesla (TSLA)
Through all the ups and downs, Tesla is still Ark’s largest holding among all of its funds. Despite the shares hovering about 10% above their 52-week low, Tesla shares are down “just” 46% from their all-time high. That’s far better than many growth stocks have done.
That said, the market’s reaction to the company’s latest results have not been all that inspiring. Despite a stock market that has been performing fairly well in recent weeks, Tesla stock fell hard in early October when the automaker reported its third-quarter production data. Despite posting a record production total, it missed analysts’ mean estimate.
Then, when TSLA reported its earnings in mid-October, the results were mixed, as its earnings beat the average estimate, but its revenue came in below the mean outlook.
However, there were many reasons for the miss, including macroeconomic issues, supply-chain problems and adverse currency fluctuations. Given Tesla’s larger goals, emphasizing the impact of a single quarter a great deal seems like a mistake.
I’d like an opportunity to buy TSLA in the $150s or $160s, but I don’t know if that will happen. Analysts, on average, expect double-digit-percentage annual revenue growth for the firm through at least 2025 and if their estimates turn out to be correct, we’re talking about a company that will generate more than $175 billion of revenue in 2025.
Best Cathie Wood Stocks: Zoom Video (ZM)
I really hesitated making Zoom Video (NYSE:ZM) the second pick on this list, but it is Cathie Wood’s second-largest position at the moment. I remember really liking Zoom Video in early 2020, partly because it had strong revenue growth, but more importantly, because it was reporting positive cash flow and was profitable.
While the stock’s performance has been absolutely horrendous — with a peak-to-trough decline of more than 88% — my observations from early 2020 remain mostly true.
Analysts, on average, now expect revenue growth of “just” 7% to $4.39 billion this year, but have we already forgotten that this firm went from revenue of $330 million in fiscal 2019 to a top line of $622 million in FY20?
Even as analysts expect the company’s earnings to dip this year, the shares still trade at a reasonable 22 times Zoom’s earnings. I don’t know if Zoom Video will ever make new highs. But if it falls back into the $60s, I find it hard for long-term growth investors to ignore.
Twilio (NYSE:TWLO) is the eighth largest position in Ark’s portfolio. The firm has more than $450 million of ZM stock. Like Zoom, Twilio stock has tumbled so far this year. For long-term investors though, I believe that the swoon of TWLO has created an opportunity.
Zoom’s problem is that it’s profitable but now in need of growth. Twilio’s problem is that it is still growing rapidly, but is starved for profits.
The company recently announced a restructuring in an effort to improve its bottom line, but the results won’t be immediate. Plus, if growth drops as a result of the restructuring, the market may not like that either. It’s a tough situation for the management team.
That said, analysts, on average, expect 25% to 35% revenue growth annually through FY 2025. If the company can keep these estimates in the 20% to 30% range and at least turn a small profit, Twilio stock will likely be rewarded when the bear market finally ends.
Lastly, Twilio’s platform is becoming incredibly popular with its customers, boding well for its future.
On the date of publication, Bret Kenwell 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.