Growth stocks are showing signs of life, and that’s great news for Cathie Wood’s Ark Invest family of exchange-traded funds (ETFs). After a great 2020 and a horrendous 2021, the high-growth funds are starting to show signs of life. Her largest ETF soared 6% last week.
Ark Invest publishes its transactions daily, so what did Wood — Ark Invest’s CEO, co-founder, and ace stock-picker — add to her portfolios on Friday? Tesla Motors (NASDAQ:TSLA), Velo3D (NYSE:VLD), and Sea Limited (NYSE:SE) are some of her new purchases, adding to earlier positions in those stocks. Let’s see why she’s making these moves.
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Tesla
The largest holding across all of Ark Invest’s ETFs is Tesla, and it’s one of the few things that worked out well for Wood last year. The stock rose 50% last year, a sharp contrast to most of her top holdings that suffered painful double-digit percentage slides in 2021.
Making matters worse, Wood was selling off her winning position through the second half of the year to fund the purchases of her poorly performing growth stocks. With Tesla recently pulling back she finally started buying again after the leading electric car maker posted blowout financial results two weeks ago.
Tesla Motors is still driving as fast as its growing line of cars. Revenue soared 65%, and it continues to post better-than-expected earnings on the bottom line.
Velo3D
Wood isn’t afraid of low-priced stocks, and at its recent close of $6.31 it’s fair to say that a lot of institutional investors are steering clear of this busted SPAC deal of a company with a market cap north of $1.1 billion despite just $23.8 million in trailing revenue. Thankfully for Wood, there’s a lot more to Velo3D than meets the eye.
Velo3D is making waves in the additive manufacturing — or 3D printing — market for metal parts. Its Sapphire platform is able to give manufacturers easy access to mission-critical parts that can’t be done with other 3D platforms. Its new Sapphire XC solution is able to achieve a fivefold increase in productivity with manufactured part costs as much as 75% lower than the original platform.
Velo3D is about to get a lot bigger soon. It sees $89 million in revenue this year, up from the $26 million it expects to report for all of 2021. Even the market cap is a bit deceptive, as cash-rich Velo3D commands an enterprise value just below $850 million. In short, Velo3D is trading at a forward revenue multiple in the single digits based on its net-cash position. Velo3D may pack on the lowest pricest in Wood’s universe of growth stocks, but it’s one of her fastest-growing companies.
Sea Limited
High growth isn’t enough to be a winning investment. Sea Limited has posted four straight years of triple-digit top-line growth, but the stock closed out the week trading 58% below last year’s all-time high.
Sea Limited is a Singapore-based company that’s a major player in gaming, e-commerce, and fintech. With investors concerned about Asian growth stocks given the rein-tightening in China and valuations contracting worldwide for esports, online shopping, and fintech companies, it’s been a humbling correction for Sea Limited.
Several analysts either lowered their price targets or downgraded Sea Limited last month, but last week saw a potential shift in mindset. Citi analyst Alica Yap put out a bullish note on the stock, suggesting that the selling in recent months is overdone. Her $386 price target implies that the shares can more than double from here.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.