Cathie Wood Stocks: Winning Investment Strategy

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Jacob Wolinsky
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Cathie Wood, a veteran in the investment business, started her career back in 1977. She worked in several investment funds and insurance companies before she decided in 2014 to found her investment management firm Ark Invest. Her focus on disruptive innovation seemed to many as a risky operation, and that is why we wanted to do more exploring top Cathie Wood Stock Picks.

As a true believer in major innovative breakthroughs, Cathie Wood is known for her often controversial pics that vary in investment success. Her prime industry sectors are technology, medical, and finance. Her core holdings are Tesla, Teladoc Health, Square, Roku, and Coinbase.

Wood with her aim for revolutionary breakthroughs has a focus on long-term investments. Her tactics were often criticized because they brought mixed results. In 2021 and 2022 her holdings resulted in solid losses, while in 2023 things started turning around. To learn more about her investment strategy, and favorite stock picks, stay with us.

Tesla (TSLA) – A Core Holding

Ark Innovations’ key part of the portfolio is shares in Tesla Inc (NASDAQ:TSLA). In the Q3 of 2022 and during Q1 and Q2 of 2023 they kept buying shares when their value dropped. In that time frame the price of Tesla’s shares fluctuated between $215 and $265. They amassed a total of 4.158 million shares.

In the last quarter of 2023, Cathie Wood started selling those shares in a region between $275 and $262. By mid-November, she sold almost 1.6 million shares leaving them with 2.6 million shares. The price stabilized, and then they continued slowly increasing the number of shares to present 4.08 million.

It takes 6.01% of Ark’s portfolio and it is the third largest holding. The current gain Cathie Wood gained by trading Tesla stocks is estimated at 173%.

Ark Innovation ETF (ARKK) – Key Investment

The total AUM managed by this fund is at the reported $8.76 billion. The last share price at $49.26, which is an increase from Q1 2023 when the share was valued at $32.82. Its performance in the last year is estimated at +54.50%.

The focus of the fund is on the information technology, health, and financial sectors. The largest holding is Coinbase Holding with an 11.29% share of the whole portfolio. Other major holdings include Roku Inc. (9.1%), Tesla Inc. (7.99%), and Zoom Video Communications (7.08%).

Teladoc Health (TDOC) – High Growth Potential

Teladoc Health Inc (NYSE:TDOC) is a well-known name in the telemedicine and virtual healthcare sector. They were founded in 2002 and today they operate in more than 130 countries. Their focus is on telehealth services, medical opinions, and AI-assisted medical analytics.

Cathie Wood started buying shares in Teladoc Health in Q3 2017. Currently, she is owning 20.3 million shares. During 2022 she increased the number of shares, and then during 2023 she sold them on two occasions. The average closing price was $25.17 and $23.34 respectively. The price of these stocks fell from Q3 2022 when they reached a top of $32 to today’s $21.81.

It is the 12th holding in size owned by Cathie Wood, and she owns 12.53% of Teladoc Health stocks. Her investment into this company is estimated to be $3.43 billion with a current estimated loss of 87%. Teladoc Health takes 2.8% of Ark’s investment portfolio.

Block (SQ) – Fintech Disruptor

Block Inc (NYSE:SQ) is a publicly owned company working in the financial technology sector. It was initially named Square and it was founded by former Twitter CEO Jack Dorsey and Jim McKelvey. Block’s main product is Square, a credit card platform. It allows small and medium-sized businesses to employ tablets and smartphones as a point-of-sale register.

Other features of this product are managing e-commerce, inventory, payroll, and other day-to-day organizational hurdles. Block is also an owner of Afterpay, a well-known buy now pay later service.

Cathie Wood first bought shares in Block in Q4 2016 at an average closing price of $12.45. She kept buying the shares until Q3 2018 when she sold a quarter of all shares she bought for an average closing price of $70.61.

From then she made sales in Q2 and Q3 2021 when the average closing price was $231.94 and $256.87 respectively. From then the price of stocks significantly dropped. The last major sale she conducted was in Q2 2022 when she sold 2.1% of her stocks at $61.70.

During 2023 Cathie Wood continued buying stocks and she currently owns 10.9 million, which is 2.01% of outstanding Block stocks. Currently, Block is her 5th holding and takes 4.75% of a total portfolio.

Roku (ROKU) – Streaming Revolution

Another major part of Cathie Wood’s portfolio is Roku Inc (NASDAQ:ROKU), a streaming revolution company. It was founded in 2002 and it manufactures streaming devices and smart TVs. Other ventures include licensing its technology to other companies, and it also works as an advertising provider on its streaming network.

Cathie Wood invested in Roku in Q4 2019 with an average closing price per stock of $137.41. She kept expanding this position until Q1 2021 when started selling the stocks. Throughout 2021 she sold a large part of this holding for $391.95, $353.72, and $376.83 respectively.

During 2022 the share price fell and Cathie Wood’s portfolio again started with the increase in this holding. In Q2 and Q3 2023, she sold around 2 million stocks at an average closing price of $60.74 and $77.44 respectively, resulting in significant losses.

Today she owns 7.63% of outstanding Roku stocks, which composes 6.00% of her entire equity portfolio. This makes Roky her 4th largest holding.

Key Investment Themes

Focus on Disruptive Innovation

Cathie Wood has a reputation for investing in companies that have the potential to create transformative technologies that can make an impact on entire industries. That can be seen from the examples of Tesla, Roku, and Teladoc Health which all set an innovative cornerstone in their respective sectors.

This approach which is based on identifying companies that have this potential is known as disruptive innovation investing. Her position as the CEO of Ark Invest saw success and a new trend in this strategy.

The key to success in this strategy is two factors. First, you must believe in companies that are aiming to make revolutionary steps. Cathie Wood is not using this as a marketing approach, she believes that companies that have something revolutionary to offer can make significant returns in the long run.

She also looks from the perspective of socially responsible investing. Cathie Wood knows what are the major issues that surround us and she truly wants to invest in companies that can make a change, and try to fix these issues.

Wood identified 5 core platforms that she thinks it is worth and important to invest in, and those are:

  • Artificial intelligence. She is long time investor in companies from the medical, transportation, and finance sectors that are moving into the implementation of AI
  • DNA sequencing. Companies that are focusing on DNA sequences in agriculture, medicine, and materials are her prime pics
  • Robotics. Utilization of robotic technologies in all sectors for boosting productivity, and task automation is one of her core believes
  • Energy storage. Moving to renewable sources of energy cannot be done without efficient, usable, and affordable energy storage. This is another investment and ethical focus of Cathie Wood
  • Blockchain Technology. The aim of increasing transparency and security in data management and online transactions is her all-time high priority.

Due to her long-term horizon perspective, and identification of problems and their solutions, she is well aware of three revolutions that are currently ongoing.

  • The Internet revolution. It has been ongoing for three decades, but the next step involves utilizing AI, blockchain, and the Internet of Things
  • The Genomics Revolution. What we know and understand about biology and medicine can be easily improved and rewritten through DNA manipulation
  • The Monetary Revolution. Traditional financial systems are under a crucial challenge from blockchain technologies. It is already offering improved security on both local and international transactions. It works as a decentralized network and doesn’t need a bank to conduct transactions. In the future, the impact of blockchain technologies will only rise.

Since Wood is managing 9 ETFs she employs teams of analysts who are always on the lookout for companies that show potential for disruptive innovation. By doing so, the overall portfolio is adjusted for ever-evolving risks.

Long-Term Investment Horizon

Long-term investment horizon comes hand in hand with disruptive innovation investments. Making revolutionary advancements takes time and faith. From the Ark Invest portfolio, we can see that Cathie Wood means business.

She placed a bet on different highly innovative companies when no one dared to do it. Wood is famous for her investment in Tesla from its beginnings. She was often criticized for this particular investment because she often bought its stocks when no one else wanted to. She recently again piled up new Tesla stocks after rumors that its vehicles will face massive recalls.

But, this can be seen as staying true to one’s word. Her strong belief in technological advancement that can have a positive impact on the future is often the fuel she needs to stay on the same course.

This approach often came under scrutiny and critique since her fund underperformed when compared to other ETFs. This was especially the case during 2021 and 2022 when Ark Innovation was one of the worst-performing equity funds. But, when investing in companies that are trying to make a difference, that can end up in massive losses.

One of her ways of increasing returns is by utilizing compounding returns. She often sticks with her investment decisions for a long time. Wood aims to capitalize on compound interest, where reinvested returns generate additional returns over time.

This strategy can amplify the gains that come from her disruptive innovation focus. Once those companies reach their potential, their price begins to rise, and compound interest then comes to life.

Another key feature of Wood’s investment strategy is focusing on the long-term advantages. Those include identifying companies with a competitive advantage, technology roadmaps, and the potential to reshape entire industries. This approach avoids sticking to short-term metrics like earnings per share.

Take A Look At Ark’s Cathie Wood On ‘Deep Value’ Stocks:

Managing Risk in Cathie Wood Stocks

Volatility in High-Growth Stocks

While Cathie Wood’s investment focuses on companies with a potential for high growth, it comes with a high risk of volatility. She is known for their concentrated approach from which we can deduce that she embraced the volatility risk. Wood’ approach can result in both high returns and high losses, and she is well aware of that risk.

She is willing to accept short-term volatility if, in the end, it will bring substantial long-term returns. It all adds up to her investment philosophy and strategy. She showed strong will through her investment career which put her in the spot that she is now.

Concentration Risk

Cathie Wood’s highly concentrated portfolio comes with amplified risks. Her bets on companies that can make a major impact can often take long, and fail.

The biggest issue with Wood’s portfolio is not only a relatively small number of holdings but also concentration in only a couple of sectors. Her favorite industries are finance, healthcare, and tech, and when a specific sector is under fire, it can cause a crucial disruption to the entire portfolio.

The problem with concentrated portfolios can result in big short-term losses. But, since Wood’s approach is long-term, the potential rewards of investing in disruptive technologies can reap significant benefits in the long haul.


What Crypto Does Cathie Wood Buy?

In the past Cathie Wood held shares in the Grayscale Bitcoin Trust, but she offloaded them in Q4 2023. She also sold over $100 million shares in Coinbase, a giant cryptocurrency exchange platform.

But, closely after that, she invested around $92 million into 4.3 million shares of ProShares Bitcoin Strategy ETF, popularly known as BITO. With this buy, ProShares became the 5th largest holding of Ark Invest with a share of 5.7% of the portfolio.

This shift from Grayscale to ProShares points to a move from trust funds to future-based ETFs.

What Companies Are in ARKK?

Top ten holdings in ARKK are:

  1. Coinbase Global Inc (NASDAQ:COIN) – 10.10%. A company that operates cryptocurrency exchange platforms
  2. Tesla Inc (NASDAQ:TSLA) – 7.76%. Manufacturer of electric cars
  3. Roku Inc (NASDAQ:ROKU) – 7.56%. A streaming company
  4. UiPath Inc (NYSE:PATH) – 6.97%. Software company with a focus on automatisation of robotic processes
  5. Zoom Video Communications Inc (NASDAQ:ZM) – 6.78%. A communication technology company
  6. Block Inc (NYSE:SQ) – 6.09%. A financial tech company with a focus on innovative credit card platforms
  7. Crispr Therapeutics AG (NASDAQ:CRSP) – 4.22%. A biotechnology company utilizing gene editing platform to find cure for rare and common diseases
  8. Roblox Corp (NYSE:RBLX) – 4.15%. A video game developing company which focuses on exploring digital 3D worlds
  9. Twilio Inc (NYSE:TWLO) – 4.09%. A company developing communication tools for making and receiving phone calls and messages
  10. Unity Software Inc (NYSE:U) – 3.80%. They developed a system for designing 2D, 2.5D, and 3D game or app scenes.

Final Thoughts

Betting on innovative breakthroughs is not always profitable. It can be difficult to assess which company and its ideas would succeed in the end. Choosing Cathie Wood’s investment approach demands a lot of patience, faith, and willingness to withstand volatility.

But, isn’t that a trait of a true visionary and a leader? Making a world a better place demands certain sacrifices, and that is also a sign of character. Although Cathie Wood’s holding choices don’t always look obvious she has her strategy, and she is willing to follow it through.

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Jacob Wolinsky is the founder of HedgeFundAlpha (formerly ValueWalk Premium), a popular value investing and hedge fund focused intelligence service. Prior to founding the company, Jacob worked as an equity analyst focused on small caps. Jacob lives with his wife and five kids in Passaic NJ. - Email: jacob(at) FD: I do not purchase any equities to avoid conflict of interest and any insider information. I only purchase broad-based ETFs and mutual funds.