The official GDP estimate for the second quarter won’t be available until later next month, but many experts – including Cathie Wood of Ark Invest – are arguing for a recession.
“We think we’re in a recession,” Wood said in a recent CNBC interview.
“We think a big problem is inventories, which I’ve never seen so much increase in my career. I’ve been there for 45 years.”
Based on how the markets are doing, the sentiment is definitely bearish. The S&P 500 is down 20% so far. Wood’s flagship fund Ark Innovation ETF (ARKK) fell more than 50% over the same period.
But investors are not giving up. CNBC noted Fact Set data showing that ARKK saw more than $180 million in inflows in June.
“I think the influx is because our customers have diversified away from broad benchmarks like the Nasdaq 100,” Wood said. “We are fully committed to disruptive innovation. Innovation solves problems.”
For those who share Wood’s vision, here’s a look at the top three holdings at ARKK.
Zoom video communication (ZM)
When meetings and classes went online due to the pandemic, Zoom’s business thrived.
But as the economy reopened and workers returned to the office, there were concerns about the growth potential of this video communications company.
Year to date, Zoom stocks are down 42%.
But Wood continues to see opportunities in the stock. In fact, Zoom is currently the largest holding in ARKK, accounting for 10.1% of the fund’s weighting.
Earlier this month, Ark Invest released a research report showing how Zoom stocks could see a glorious rebound in the not-too-distant future.
“According to ARK’s open source research and model, Zoom’s stock price could approach $1,500 in 2026, representing 76% annual growth,” Wood’s team wrote.
Since Zoom stocks currently trade for about $106 each, that price target implies a potential advantage of more than 1,300%.
Tesla has long been a staple for growth investors. But now it’s also a name worth considering for contrarian investors – given how much the stock has pulled back.
Since hitting a closing high of $1,229.91 on Nov. 4, the stock is down a whopping 46%.
But things remain on the right track. In the first quarter, shipments of the Model S, Model X, Model 3 and Model Y were 310,048 vehicles, an increase of 68% year-over-year.
Ark Invest also sees a game-changing product coming for the company – robotaxi.
“Tesla’s future roboticaxi business line is a key driver, contributing 60% of projected value and more than half of projected EBITDA by 2026,” Ark analyst Tasha Keeney wrote in a report in April.
In that report, Ark forecasts a stock price of $4,600 for Tesla in 2026. That represents a potential advantage of more than 590% over where the stock stands today.
It should therefore come as no surprise that Tesla is the second largest stake in ARKK with a weight of 8.6%.
of the year (YEAR)
The secular trend of on-demand video streaming has led to several winners in the tech space.
Roku is one of them. Since the IPO in September 2017, the stock has risen more than 200%.
The company’s platform gives users access to streaming services such as Youtube, Netflix and Disney+. Roku also offers its own ad-supported channels of licensed third-party content.
The company added 1.1 million active accounts in the first quarter, bringing the total number of active accounts to 61.3 million. Revenue grew 28% year over year to $734 million.
While Roku’s business is growing, investors have bought in quickly. The stock has fallen a whopping 82% in the past 12 months.
But Ark Invest is not giving up on Roku. In fact, Roku remains the third largest holding in ARKK, accounting for 8.4% of the fund’s weighting.
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