While Ark has stumbled recently, its track record is still amazing.
Ark Invest has dominated the growth investing world recently. Cathie Wood, Ark's founder, has become a prominent influencer -- and it's not hard to see why. Her flagship Ark Innovation ETF (ticker: ARKK) has soared 480% over the past five years. Riding the success of the innovation ETF, Ark has branched out into a variety of other exchange-traded funds drilling down on certain specific sectors and themes. For example, Ark has launched ETFs in biotech, internet stocks and 3D printing. Most recently, Ark launched the ARK Space Exploration & Innovation ETF (ARKX). However, Ark's stocks have come under pressure in recent months. Since February, the ARKK fund has fallen 30% from its peak as investors have rotated from growth stocks into economic reopening names. That correction, however, could spell opportunity. These seven Ark stocks have been huge winners -- the recent sell-off notwithstanding -- and could soar to new heights once growth stocks come back into favor.
Roku enjoyed tremendous user growth during the pandemic. The stay-at-home orders gave it the perfect opportunity to build consumer awareness. Roku's momentum has faded a bit this year as traders sell off the stay-at-home stocks. Additionally, the company has gotten into a dispute with YouTube TV over licensing rates to use Roku's platform. Still, with more than 50 million active accounts, Roku has staying power in the streaming space. Also, unlike many rapid growth stocks, Roku is already meaningfully profitable. It's not hard to see why Wood has held onto her Roku shares despite the recent pullback.
Trailing 12-month return: 175%
Grayscale Bitcoin Trust (GBTC)
Bitcoin has been getting hammered over the past few weeks. Tesla (TSLA) CEO Elon Musk's sudden turn against Bitcoin in favor of Dogecoin has done the premier cryptocurrency no favors. However, give credit to Ark Invest where it's due -- it has backed cryptocurrencies for years. Ark didn't just hop on when momentum was reaching its peak. So while the Grayscale Bitcoin Trust is down lately, it doesn't take away from the fact that Ark has tripled its position over the past year. And, at some point, altcoin mania should fade. Once the gold rush in meme tokens and lesser-known altcoins fades, Bitcoin should return to prominence. The potential launch of Bitcoin ETFs should also bode well for GBTC and other investments linked to the price of Bitcoin.
Trailing 12-month return: 203%
Crispr Therapeutics (CRSP)
Ark Invest has made a name for itself picking out biotech stars, and Crispr Therapeutics is one such example. The company is known for its CRISPR-Cas9 technology platform. This allows users to edit individual genes by modifying the genome directly. This is, needless to say, groundbreaking stuff. It has particular potential to wipe out rare hereditary disease, which would be a breakthrough in scientific progress. At this point, Crispr still trades largely on potential. The company doesn't have approved products yet, and thus relies on collaboration payments, grants or other such revenues to keep things going. Still, if Crispr reaches its potential, the sky is the limit for this Wood pick.
Trailing 12-month return: 79%
10x Genomics (TXG)
10x Genomics is a life sciences company that has been growing at light speed. Between 2017 and 2020, the company grew its annual revenues from $71 million to $299 million. 10x Genomics offers a product platform combining hardware, chemistry and software to allow lab researchers to do advanced analysis on single cells. The platform has obviously found strong reception, given the massive revenue growth rate. 10x Genomics is still an early stage company and runs large operating losses, as it's reinvesting heavily back into research and development and marketing. However, the company has a strong balance sheet with plenty of cash, giving it time to keep scaling the business. Within a few years, it should either reach profitability or be able to sell out to a larger life sciences industry leader.
Trailing 12-month return: 85%
Kratos Defense & Security Solutions (KTOS)
Ark Invest has gotten a reputation for its pure tech stock picks. However, the firm has more diversification than some give it credit for. That's particularly true with the new Ark space exploration ETF. Kratos is a prime example. It makes energy weapons, missile defense, satellites and other such gear. The company's traditional defense business generates solid profits, giving it a core base of operations. And from there, it can prioritize the satellites and space business with additional upside as the race for Mars accelerates. Analysts see top-line revenue growth exceeding 15% per year and topping $1 billion in 2023. Regrettably, the recent increase in hostilities in the Middle East could serve as another catalyst for sales of Kratos' defense products.
Trailing 12-month return: 58%
Twist Bioscience (TWST)
Twist Bioscience is another of Wood's big biotech winners. The company focuses on producing synthetic genes and biological products at affordable prices. This is vital. Since the human genome was mapped at the turn of the century, pharmaceutical companies have come up with numerous innovative therapies. However, these often cost hundreds of thousands of dollars per patient due to the high costs and limited scale on these sorts of therapies for rare diseases. Twist aims to bring these therapies into the mainstream. Right now, Twist is generating around $100 million per year in revenues, but its market is already in the billions and growing rapidly. Ark thinks Twist will be able to seize tons of market share going forward as biotech firms unlock treatments for more rare diseases.
Trailing 12-month return: 134%
PayPal Holdings (PYPL)
Ark Invest has a reputation for buying speculative pure growth stocks. However, Wood has plenty of safer holdings as well that also perform strongly. PayPal, for example, is the dominant online merchant services firm. The e-commerce boom over the past year has treated the company well. Even after a big run-up in its share price, PYPL stock is now selling for just 41 times next year's earnings. That's not quite a steal on an earnings basis, but it's not bad at all for a firm that has grown earnings at 29% per year compounded over the past five years. With tech stocks in a bit of a slump now, it also opens the door for PayPal to make acquisitions at much more appealing valuations. While the reopening trade has clipped some momentum from e-commerce names, long-term winners like PayPal have nothing to worry about.
Trailing 12-month return: 67%
Seven of the best performing Cathie Wood stocks:
-- Roku (ROKU)
-- Grayscale Bitcoin Trust (GBTC)
-- Crispr Therapeutics (CRSP)
-- 10x Genomics (TXG)
-- Kratos Defense & Security Solutions (KTOS)
-- Twist Bioscience (TWST)
-- PayPal Holdings (PYPL)